Finance, farms, and the Fed's early years

Bruce Carlin and William Mann

No 23511, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We provide causal evidence that discount rate changes by the Federal Reserve affected economic output in the 1920s. Our identification strategy exploits county-level variation in access to the Fed's discount window, and we implement this strategy with hand-collected data on banking and agriculture in Illinois in the early 20th century. The mechanism for the Fed's effect on agriculture was a bank credit channel, operating independently of any deflationary effect on money supply. Our findings suggest that the Fed deliberately managed transitory shocks during 1920-1921, mitigating debt burdens with which farms would struggle in the years leading to the Great Depression.

JEL-codes: B26 G21 G28 (search for similar items in EconPapers)
Date: 2017-06
New Economics Papers: this item is included in nep-cba, nep-his, nep-mac and nep-mon
Note: CF DAE EFG ME
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Citations: View citations in EconPapers (3)

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