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Two Crises, Two Ideas and One Question

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Abstract

Specific ideas about the Fisher relation between real and nominal interest rates and more general ideas about the nature of the central bank's duty to support the financial system in times of crisis were important to the Monetarist re-assessment of the causes of the Great Depression and what this event implied about the inherent stability of the market economy. Aspects of the evolution of these ideas since the Depression and the role that they have played in recent debates about the Great Recession are discussed, and some tentative conclusions about the validity of Monetarist ideas are drawn.

Suggested Citation

  • David Laidler, 2012. "Two Crises, Two Ideas and One Question," University of Western Ontario, Economic Policy Research Institute Working Papers 20124, University of Western Ontario, Economic Policy Research Institute.
  • Handle: RePEc:uwo:epuwoc:20124
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    File URL: http://economics.uwo.ca/epri/workingpapers_docs/wp2012/Laidler_04.pdf
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    Cited by:

    1. Thomas M. Humphrey, 2013. "Arresting Financial Crises: The Fed versus the Classicals," Economics Working Paper Archive wp_751, Levy Economics Institute.

    More about this item

    Keywords

    Great Depression; Great Recession; Fisher relation; interest rate; monetary policy; central bank; lender of last resort; quantitative easing; money supply; deflation; inflation; monetarism; economic stability;

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes

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