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Recovery from the Great Depression: The Farm Channel in Spring 1933

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  • Joshua K. Hausman
  • Paul W. Rhode
  • Johannes F. Wieland

Abstract

From March to July 1933, industrial production rose 57 percent. We show that an important source of recovery was the effect of dollar devaluation on farm prices, incomes, and consumption. Devaluation immediately raised traded crop prices, and auto sales grew more rapidly in states and counties most exposed to these price increases. The response was amplified in counties with more severe farm debt burdens. For plausible assumptions about farmers’ relative MPC, the incidence of higher farm prices, and the aggregate multiplier, this redistribution to farmers accounted for a substantial portion of spring 1933 growth. This farm channel thus provides an example of how the distributional consequences of macroeconomic policies can have large aggregate effects. That recovery in 1933 benefited from redistribution to farmers suggests an important limitation to the use of 1933 as a guide to the effects of monetary regime changes in other circumstances.

Suggested Citation

  • Joshua K. Hausman & Paul W. Rhode & Johannes F. Wieland, 2017. "Recovery from the Great Depression: The Farm Channel in Spring 1933," NBER Working Papers 23172, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:23172
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    References listed on IDEAS

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    Cited by:

    1. Michael D. Bordo, 2017. "An Historical Perspective on the Quest for Financial Stability and the Monetary Policy Regime," Economics Working Papers 17108, Hoover Institution, Stanford University.
    2. Michael D. Bordo, 2017. "An historical perspective on financial stability and monetary policy regimes: A case for caution in central banks current obsession with financial stability," Working Paper 2018/5, Norges Bank.
    3. Peter H. Bent, 2018. "Recovery from Financial Crises in Peripheral Economies, 1870-1913," CEH Discussion Papers 07, Centre for Economic History, Research School of Economics, Australian National University.

    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • N12 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - U.S.; Canada: 1913-
    • N52 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries - - - U.S.; Canada: 1913-

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