The Great Depression and the Great Recession: A view from financial markets

Francesco Bianchi

Journal of Monetary Economics, 2020, vol. 114, issue C, 240-261

Abstract: Similarities between the Great Depression and the Great Recession are documented with respect to the behavior of financial markets. A Great Depression regime is identified by using a Markov-switching VAR. The probability of this regime has remained close to zero for many decades, but spiked for a short period during the most recent financial crisis, the Great Recession. The Great Depression regime implies a collapse of the stock market, with small-growth stocks outperforming small-value stocks. A model with financial frictions and uncertainty about policy makers’ intervention suggests that policy intervention during the Great Recession might have avoided a second Great Depression. A multi-country analysis shows that the Great Depression and Great Recession were not like any other financial crises.

Keywords: Monetary and fiscal policies; Coordination; Emergency budget; Markov-switching models; Liquidity traps welfare; Uncertainty (search for similar items in EconPapers)
JEL-codes: D83 E31 E52 E62 E63 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304393219300649
Full text for ScienceDirect subscribers only

Related works:
Working Paper: The Great Depression and the Great Recession: A View from Financial Markets (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:114:y:2020:i:c:p:240-261

DOI: 10.1016/j.jmoneco.2019.03.010

Access Statistics for this article

Journal of Monetary Economics is currently edited by R. G. King and C. I. Plosser

More articles in Journal of Monetary Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().