A Monetary Explanation for the Recession of 1797

Nicholas A. Curott () and Tyler A. Watts
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Nicholas A. Curott: Ball State University
Tyler A. Watts: East Texas Baptist University

Eastern Economic Journal, 2018, vol. 44, issue 3, No 3, 399 pages

Abstract: Abstract Credit expansion by Bank of the United States in the early 1790s unleashed an investment bubble in real estate, manufacturing, and infrastructure projects. Domestic inflation created a disparity in international prices that led to a reduction in net exports and eventual specie outflow and deflation. An ensuing credit crunch brought a recession involving declines in prices and nominal GDP, the bursting of the land bubble, and a cluster of business and personal bankruptcies. We detail changes in credit, the price level, and interest rates caused by this expansion, as well investment errors that these conditions spawned.

Keywords: Panic of 1797; Business cycles; Speculation; Credit expansion; E32; E50; N11 (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1057/s41302-017-0092-3

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