Great Depression, monetary and financial forces in : The New Palgrave Dictionary of Economics

Great Depression, monetary and financial forces in

From The New Palgrave Dictionary of Economics, Second Edition, 2008

Edited by Steven N. Durlauf and Lawrence E. Blume

Abstract

We survey papers that seek model-based answers to the following questions regarding the Great Depression. What caused the worldwide collapse in output from 1929 to 1933? Why was the recovery from the trough of 1933 so protracted for the United States? How costly are Depression-like episodes in terms of welfare? Was the decline in output preventable? The papers point to: an important, but not exclusive, role of monetary factors in causing the decline; counterproductive labour market interventions in making the recovery slow; uninsured risk of unemployment in making Depression-like episodes costly; timely provision of liquidity as a preventive policy.

Keywords

confidence; debt-deflation hypothesis; depressions; dynamic stochastic general equilibrium (DSGE) model; financial intermediation; gold standard; Great Depression; liquidity preference; monetary and financial forces in the Great Depression; monetary base; money multiplier; multiple equilibria; sticky wages; total factor productivity

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How to cite this article

Chatterjee, Satyajit and P. Dean Corbae. "Great Depression, monetary and financial forces in." The New Palgrave Dictionary of Economics. Second Edition. Eds. Steven N. Durlauf and Lawrence E. Blume. Palgrave Macmillan, 2008. The New Palgrave Dictionary of Economics Online. Palgrave Macmillan. 26 March 2012 <http://www.dictionaryofeconomics.com/article?id=pde2008_M000398> doi:10.1057/9780230226203.0673