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What Ended the Great Depression?

  • Christina D. Romer (a1)

This paper examines the role of aggregate-demand stimulus in ending the Great Depression. Plausible estimates of the effects of fiscal and monetary changes indicate that nearly all the observed recovery of the U.S. economy prior to 1942 was due to monetary expansion. A huge gold inflow in the mid- and late 1930s swelled the money stock and stimulated the economy by lowering real interest rates and encouraging investment spending and purchases of durable goods. That monetary developments were crucial to the recovery implies that self-correction played little role in the growth of real output between 1933 and 1942.

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Michael Darby , “Three-and-a-Half Million U.S. Employees Have Been Mislaid: Or, an Explanation of Unemployment 1934–1941,” Journal of Political Economy, 84 (021976), pp. 116.

J. Bradford De Long , and Lawrence H. Summers , “How Does Macroeconomic Policy Affect Output?Brookings Papers on Economic Activity (1988:2), pp. 433–80.

Robert Margo , “Interwar Unemployment in the United States: Evidence from the 1940 Census Sample,” in Barry Eichengreen and T. J. Hatton , eds., Interwar Unemployment in International Perspective (Dordrecht, 1988), pp. 325–52.

Bennett T. McCallum , “Could A Monetary Base Rule Have Prevented the Great Depression?Journal of Monetary Economics, 26 (081990), pp. 326.

Anthony Patrick O'Brien , “A Behavioral Explanation for Nominal Wage Rigidity During the Great Depression,” Quarterly Journal of Economics, 104 (111989), pp. 719–35.

Christina D. Romer , “World War I and the Postwar Depression: A Reinterpretation Based on Alternative Estimates of GNP,” Journal of Monetary Economics, 22 (071988), pp. 91115.

Christina D. Romer , and David H. Romer , “Does Monetary Policy Matter? A New Test in the Spirit of Friedman and Schwartz,” NBER Macroeconomics Annual, 4 (1989), pp. 121–70.

Peter Temin , and Barrie Wigmore , “The End of One Big Deflation,” Explorations in Economic History, 27 (101990), pp. 483502.

Michael Weinstein , “Some Macroeconomic Impacts of the National Industrial Recovery Act, 1933–1935,” in Karl Brunner , ed., The Great Depression Revisited (Boston, 1981), pp. 262–81.

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The Journal of Economic History
  • ISSN: 0022-0507
  • EISSN: 1471-6372
  • URL: /core/journals/journal-of-economic-history
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