scholarly journals The Case of the Negative Nominal Interest Rates: New Estimates of the Term Structure of Interest Rates During the Great Depression

10.3386/w2472 ◽  
1987 ◽  
Author(s):  
Stephen Cecchetti
Keyword(s):  
Interest Rates ◽  
Great Depression ◽  
Term Structure ◽  
The Great Depression ◽  
Nominal Interest Rates

scholarly journals The Missing Transmission Mechanism in the Monetary Explanation of the Great Depression

2013 ◽  
Vol 103 (3) ◽  
pp. 66-72 ◽  
Author(s):  
Christina D Romer ◽  
David H Romer
Keyword(s):  
Interest Rates ◽  
Detailed Analysis ◽  
Great Depression ◽  
Federal Reserve ◽  
Transmission Mechanism ◽  
Monetary Shocks ◽  
Real Interest Rates ◽  
The Great Depression ◽  
Nominal Interest Rates ◽  
Business Week

This paper examines the missing transmission mechanism in Friedman's and Schwartz's monetary explanation of the Great Depression. We review the challenge provided by the decline in nominal interest rates in the early 1930s, and show that the monetary explanation requires not just that there were expectations of deflation, but that they were caused by monetary contraction. Using a detailed analysis of Business Week magazine, we find evidence that monetary contraction and Federal Reserve policy contributed to expectations of deflation during the downturn. This suggests that monetary shocks may have depressed spending and output in part by raising real interest rates.

READING KEYNES AT THE ZERO LOWER BOUND: THE GREAT DEPRESSION, THE LIQUIDITY TRAP, AND UNCONVENTIONAL POLICY

2018 ◽  
Vol 40 (3) ◽  
pp. 301-334 ◽  
Author(s):  
Richard Sutch
Keyword(s):  
Monetary Policy ◽  
Lower Bound ◽  
Interest Rates ◽  
Great Depression ◽  
Zero Lower Bound ◽  
Liquidity Trap ◽  
The Great Depression ◽  
Nominal Interest Rates

John Maynard Keynes’s analysis of the Great Depression has strong parallels to recent theorizing about the post-2008 Great Recession. There are also remarkable similarities between the two historical episodes: the collapse of demand for new fixed investment, the role of the zero lower bound liquidity trap in hampering conventional monetary policy, the multi-year period of near-zero short-term rates, and the protracted period of subnormal prosperity. A major difference between then and now is that monetary authorities in the recent situation actively pursued an unconventional policy with massive purchases of long-term securities. Keynes couldn’t convince authorities of his era to pursue such a plan, but it was precisely the monetary policy he advocated for a depressed economy stuck at the zero lower bound of nominal interest rates.

Uncertainty as a Propagating Force in The Great Depression

1994 ◽  
Vol 54 (4) ◽  
pp. 825-849 ◽  
Author(s):  
J. Peter Ferderer ◽  
David A. Zalewski
Keyword(s):  
Interest Rates ◽  
Great Depression ◽  
Term Structure ◽  
Risk Premium ◽  
Gold Standard ◽  
Significant Proportion ◽  
Banking Crises ◽  
The Great Depression ◽  
Aggregate Investment ◽  
Investment Spending

This article argues that the banking crises and collapse of the international gold standard in the early 1930s contributed to the severity of the Great Depression by increasing interest-rate uncertainty. Two pieces of evidence support this conclusion. First, uncertainty (as measured by the risk premium embedded in the term structure of interest rates) rises during the banking crises and is positively linked to financial-market volatility associated with the breakdown in the gold standard. Second, the risk premium explains a significant proportion of the variation in aggregate investment spending during the Great Depression.

scholarly journals Journal of the History of Economic Thought Preprints - READING KEYNES AT THE ZERO LOWER BOUND: THE GREAT DEPRESSION, THE LIQUIDITY TRAP, AND UNCONVENTIONAL POLICY

2018 ◽  
Author(s):  
Richard Sutch
Keyword(s):  
Monetary Policy ◽  
Lower Bound ◽  
Interest Rates ◽  
Great Depression ◽  
Economic Thought ◽  
Zero Lower Bound ◽  
Liquidity Trap ◽  
The Great Depression ◽  
Nominal Interest Rates ◽  
History Of

John Maynard Keynes’s analysis of the Great Depression has strong parallels to recent theorizing about the post-2008 Great Recession. There are also remarkable similarities between the two historical episodes: the collapse of demand for new fixed investment, the role of the zero-lower-bound liquidity trap in hampering conventional monetary policy, the multi-year period of near-zero short-term rates, and the protracted period of subnormal prosperity. A major difference between then and now that monetary authorities in the recent situation actively pursued an unconventional policy with massive purchases of long-term securities. Keynes couldn’t convince authorities of his era to pursue such a plan, but it was precisely the monetary policy he advocated for a depressed economy stuck at the zero lower bound of nominal interest rates.

scholarly journals Shifts in US Federal Reserve Goals and Tactics for Monetary Policy: A Role for Penitence?

2013 ◽  
Vol 27 (4) ◽  
pp. 65-86 ◽  
Author(s):  
Julio J Rotemberg
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Great Depression ◽  
Federal Reserve ◽  
Bank Loans ◽  
The Great Depression

This paper considers some of the large changes in the Federal Reserve's approach to monetary policy. It shows that, in some important cases, critics who were successful in arguing that past Fed approaches were responsible for mistakes that caused harm succeeded in making the Fed averse to these approaches. This can explain why the Fed stopped basing monetary policy on the quality of new bank loans, why it stopped being willing to cause recessions to deal with inflation, and why it was temporarily unwilling to maintain stable interest rates in the period 1979–1982. It can also contribute to explaining why monetary policy was tight during the Great Depression. The paper shows that the evolution of policy was much more gradual and flexible after the Volcker disinflation, when the Fed was not generally deemed to have made an error.

Late Nineteenth-Century American Retardation: A Neoclassical Analysis

1973 ◽  
Vol 33 (3) ◽  
pp. 581-607 ◽  
Author(s):  
Jeffrey G. Williamson
Keyword(s):  
Nineteenth Century ◽  
Interest Rates ◽  
Output Growth ◽  
Historical Research ◽  
Late Nineteenth Century ◽  
Real Output ◽  
The Past ◽  
The Great Depression ◽  
Nominal Interest Rates ◽  
Late Nineteenth

English growth experience from the 1860's to the 1890's has been the source of continued research and debate. Judged by the recent contributions of McCloskey, the intensity of the debate has diminished little over the past seventy-five years. The period has long been identified in the literature as the “Great Depression.” It has been well established that the decades up to 1896 were characterized by declining general price levels, declining nominal interest rates, and serious retardation in aggregate real output growth. These are not merely figments of historical research since they were subjects of contemporary observation as well.

Sign in / Sign up

Export Citation Format

Share Document