IDEAS home Printed from https://ideas.repec.org/p/uwo/epuwoc/20135.html
   My bibliography  Save this paper

Reassessing the Thesis of the Monetary History

Author

Abstract

The economic crisis that began in 2007 and still lingers has invited comparison with the Great Depression of the 1930s. It has also generated renewed interest in Milton Friedman and Anna Schwartz’s explanation of the latter as mainly the consequence of the Fed’s failure as a lender of last resort at its onset, and the ineptitude of its policies thereafter. This explanation is reassessed in the light of events since 2007, and it is argued that its plausibility emerges enhanced, even though policy debates in recent years have paid more attention to interest rates and credit markets than to Friedman and Schwartz’s key variable, the quantity of money.

Suggested Citation

  • David Laidler, 2013. "Reassessing the Thesis of the Monetary History," University of Western Ontario, Economic Policy Research Institute Working Papers 20135, University of Western Ontario, Economic Policy Research Institute.
  • Handle: RePEc:uwo:epuwoc:20135
    as

    Download full text from publisher

    File URL: http://economics.uwo.ca/epri/workingpapers_docs/wp2013/Laidler_05.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Darby, Michael R, 1976. "Three-and-a-Half Million U.S. Employees Have Been Mislaid: Or, an Explanation of Unemployment, 1934-1941," Journal of Political Economy, University of Chicago Press, vol. 84(1), pages 1-16, February.
    2. repec:ucp:bkecon:9780226519999 is not listed on IDEAS
    3. Acheson Graeme G. & Hickson Charles R & Turner John D, 2010. "Does Limited Liability Matter? Evidence From Nineteenth-Century British Banking," Review of Law & Economics, De Gruyter, vol. 6(2), pages 247-273, December.
    4. Ireland, Peter N., 2014. "The Macroeconomic Effects Of Interest On Reserves," Macroeconomic Dynamics, Cambridge University Press, vol. 18(06), pages 1271-1312, September.
    5. Michael D. Bordo, 1989. "Introduction to "Money, History, and International Finance: Essays in Honor of Anna J. Schwartz"," NBER Chapters,in: Money, History, and International Finance: Essays in Honor of Anna J. Schwartz, pages 1-12 National Bureau of Economic Research, Inc.
    6. Nelson, Edward & Schwartz, Anna J., 2008. "Rejoinder to Paul Krugman," Journal of Monetary Economics, Elsevier, vol. 55(4), pages 861-862, May.
    7. Christiano, Lawrence & Motto, Roberto & Rostagno, Massimo, 2004. "The Great Depression and the Friedman-Schwartz hypothesis," Working Paper Series 326, European Central Bank.
    8. David Laidler, 2010. "The Monetary Economy and the Economic Crisis," University of Western Ontario, Economic Policy Research Institute Working Papers 20101, University of Western Ontario, Economic Policy Research Institute.
    9. David Laidler, 2004. "Central Banks as Lenders of Last Resort - Trendy or Passe?," University of Western Ontario, Economic Policy Research Institute Working Papers 20048, University of Western Ontario, Economic Policy Research Institute.
    10. Lawrence J. Christiano & Roberto Motto & Massimo Rostagno, 2003. "The Great Depression and the Friedman-Schwartz hypothesis," Proceedings, Federal Reserve Bank of Cleveland, pages 1119-1215.
    11. Ben S. Bernanke & Mark Gertler, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 27-48, Fall.
    12. Christina D. Romer & David H. Romer, 1989. "Does Monetary Policy Matter? A New Test in the Spirit of Friedman and Schwartz," NBER Chapters,in: NBER Macroeconomics Annual 1989, Volume 4, pages 121-184 National Bureau of Economic Research, Inc.
    13. Kris James Mitchener & Gary Richardson, 2013. "Shadowy Banks and Financial Contagion during the Great Depression: A Retrospective on Friedman and Schwartz," American Economic Review, American Economic Association, vol. 103(3), pages 73-78, May.
    14. Nelson, Edward, 2013. "Friedman's monetary economics in practice," Journal of International Money and Finance, Elsevier, vol. 38(C), pages 59-83.
    15. David LAIDLER, 2003. "Two Views Of The Lender Of Last Resort: Thornton And Bagehot," Cahiers d’économie politique / Papers in Political Economy, L'Harmattan, issue 45, pages 61-78.
    16. A. J. Brown, 1938. "The Liquidity-Preference Schedules Of The London Clearing Banks," Oxford Economic Papers, Oxford University Press, vol. 0(1), pages 49-82.
    17. Milton Friedman & Anna J. Schwartz, 1963. "A Monetary History of the United States, 1867–1960," NBER Books, National Bureau of Economic Research, Inc, number frie63-1, April.
    18. Bernanke, Ben S, 1983. "Nonmonetary Effects of the Financial Crisis in Propagation of the Great Depression," American Economic Review, American Economic Association, vol. 73(3), pages 257-276, June.
    19. Michael D. Bordo, 1989. "Money, History, and International Finance: Essays in Honor of Anna J. Schwartz," NBER Books, National Bureau of Economic Research, Inc, number bord89-1, April.
    20. Nelson, Edward & Schwartz, Anna J., 2008. "The impact of Milton Friedman on modern monetary economics: Setting the record straight on Paul Krugman's "Who was Milton Friedman?"," Journal of Monetary Economics, Elsevier, vol. 55(4), pages 835-856, May.
    21. Thomas M. Humphrey, 2010. "Lender of Last Resort: What It Is, Whence It Came, and Why the Fed Isn't It," Cato Journal, Cato Journal, Cato Institute, vol. 30(2), pages 333-364, Spring.
    22. Philip Cagan, 1965. "Determinants and Effects of Changes in the Stock of Money, 1875–1960," NBER Books, National Bureau of Economic Research, Inc, number caga65-1, April.
    23. Douglas A. Irwin, 2011. "Gold Sterilization and the Recession of 1937-38," NBER Working Papers 17595, National Bureau of Economic Research, Inc.
    24. Lauchlin Currie, 1934. "The Failure of Monetary Policy to Prevent the Depression of 1929-32," Journal of Political Economy, University of Chicago Press, vol. 42, pages 145-145.
    25. Eichengreen, Barry, 1996. "Golden Fetters: The Gold Standard and the Great Depression, 1919-1939," OUP Catalogue, Oxford University Press, number 9780195101133.
    26. Hetzel,Robert L., 2008. "The Monetary Policy of the Federal Reserve," Cambridge Books, Cambridge University Press, number 9780521881326, May.
    27. David Laidler, 2015. "Three revolutions in macroeconomics: their nature and influence," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 22(1), pages 1-25, February.
    28. Tim Congdon, 2010. "Monetary Policy at the Zero Bound," World Economics, World Economics, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 11(1), pages 11-48, January.
    29. R. M. Goodwin, 1941. "The Supply Of Bank Money In England And Wales, 1920–1938," Oxford Economic Papers, Oxford University Press, vol. 0(1), pages 1-29.
    30. Robert L. Hetzel, 2013. "ECB monetary policy in the recession: a New Keynesian (old monetarist) critique," Working Paper 13-07, Federal Reserve Bank of Richmond.
    31. Krugman, Paul, 2008. "Response to Nelson and Schwartz," Journal of Monetary Economics, Elsevier, vol. 55(4), pages 857-860, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Michael T. Belongia & Peter N. Ireland, 2016. "Money and Output: Friedman and Schwartz Revisited," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 48(6), pages 1223-1266, September.
    2. Scott Sumner, 2015. "What Would Milton Friedman Have Thought of the Great Recession?," American Journal of Economics and Sociology, Wiley Blackwell, vol. 74(2), pages 209-235, March.
    3. Finn Poschmann, 2014. "Shareholder Liability: A New (Old) Way of Thinking about Financial Regulation," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 401, February.

    More about this item

    Keywords

    Great Depression; Great Contraction; Great Recession; Keynesianism; Monetarism; Lender of Last Resort; Money; High-powered money; Monetary base; Currency; Bank reserves; Quantitative easing; Open-market operations;

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • N2 - Economic History - - Financial Markets and Institutions

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:uwo:epuwoc:20135. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: http://economics.uwo.ca/research/research_papers/epri_workingpapers.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.