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The Great Crash and the Onset of the Great Depression

  • Christina D. Romer

This paper argues that the collapse of stock prices in October 1929 generated temporary uncertainty about future income which caused consumers to forego purchases of durable and semidurable goods in late 1929 and much of 1930. Evidence that the stock market crash generated uncertainty is provided by the decline in confidence expressed by contemporary forecasters. Evidence that this uncertainty affected consumer behavior is provided by the fact that spending on consumer durables and semidurables declined immediately following the Great Crash and by the fact that there is a negative historical relationship between stock market variability and the production of consumer durables in the prewar era.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2639.

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Date of creation: Jun 1988
Date of revision:
Publication status: published as Quarterly Journal of Economics, Vol. 105, pp. 597-624, August 1990.
Handle: RePEc:nbr:nberwo:2639
Note: EFG
Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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  1. Mayer, Thomas, 1978. "Consumption in the Great Depression," Journal of Political Economy, University of Chicago Press, vol. 86(1), pages 139-45, February.
  2. Ray C. Fair & Matthew D. Shapiro & Kathryn M. Dominguez, 1986. "Forecasting the Depression: Harvard Versus Yale," NBER Working Papers 2095, National Bureau of Economic Research, Inc.
  3. Moses Abramovitz, 1950. "Total Inventories during Business Cycles," NBER Chapters, in: Inventories and Business Cycles, with Special Reference to Manufacturer's Inventories, pages 76-108 National Bureau of Economic Research, Inc.
  4. Robert E. Lipsey & Doris Preston, 1966. "Source Book of Statistics Relating to Construction," NBER Books, National Bureau of Economic Research, Inc, number lips66-1, December.
  5. Gramlich, Edward M, 1983. "Models of Inflation Expectations Formation: A Comparison of Household and Economist Forecasts," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 15(2), pages 155-73, May.
  6. Hamilton, James D., 1987. "Monetary factors in the great depression," Journal of Monetary Economics, Elsevier, vol. 19(2), pages 145-169, March.
  7. Mishkin, Frederic S., 1978. "The Household Balance Sheet and the Great Depression," The Journal of Economic History, Cambridge University Press, vol. 38(04), pages 918-937, December.
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