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The Macroeconomics of the Great Depression: A Comparative Approach

  • Ben S. Bernanke

Recently, research on the causes of the Great Depression has shifted from a heavy emphasis on events in the United States to a broader, more comparative approach that examines the interwar experiences of many countries simultaneously. In this lecture I survey the current state of our knowledge about the Depression from a comparative perspective. On the aggregate demand side of the economy, comparative analysis has greatly strengthened the empirical case for monetary shocks as a major driving force of the Depression; an interesting possibility suggested by this analysis is that the worldwide monetary collapse that began in 1931 may be interpreted as a jump from one Nash equilibrium to another. On the aggregate supply side, comparative empirical studies provide support for both induced financial crisis and sticky nominal wages as mechanisms by which nominal shocks had real effects. Still unresolved is why nominal wages did not adjust more quickly in the face of mass unemployment.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4814.

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Date of creation: Aug 1994
Date of revision:
Publication status: published as Journal of Money, Credit and Banking, February 1995, vol. 27, no. 1,pp. 1-28
Handle: RePEc:nbr:nberwo:4814
Note: EFG ME
Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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  8. Eichengreen, Barry & Hatton, Tim, 1988. "Interwar Unemployment in International Perspective," Institute for Research on Labor and Employment, Working Paper Series qt7bw188gk, Institute of Industrial Relations, UC Berkeley.
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  17. Bernanke, Ben & Gertler, Mark, 1990. "Financial Fragility and Economic Performance," The Quarterly Journal of Economics, MIT Press, vol. 105(1), pages 87-114, February.
  18. Eichengreen, Barry & Grossman, Richard S., 1994. "Debt Deflation and Financial Instability: Two Historical Explorations," Department of Economics, Working Paper Series qt7kj202cz, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  19. Martin Evans & Paul Wachtel, 1992. "Were Price Changes during the Great Depression Anticipated? Evidence from Nominal Interest Rates," Working Papers 92-12, New York University, Leonard N. Stern School of Business, Department of Economics.
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