Is Financial Friction Irrelevant to the Great Depression? - Simple modification of the Carlstrom-Fuerst model -

Keiichiro Kobayashi

Discussion papers from Research Institute of Economy, Trade and Industry (RIETI)

Abstract: It is argued that existing theory implies that financial frictions appear as investment wedges. Since data show that the output declines in the Great Depression were mainly due to the productivity declines, it is also argued that financial frictions may not be the primary cause of the depression. By slightly modifying the model of Carlstrom and Fuerst (1997), I show that financial frictions may show up as declines in productivity. This result may restore the relevance of financial frictions to the Great Depression and other depression episodes, such as Japan's "lost decade."

Pages: 10 pages
Date: 2004-09
New Economics Papers: this item is included in nep-fin, nep-his and nep-mac
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.rieti.go.jp/jp/publications/dp/04e030.pdf (application/pdf)

Related works:
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:eti:dpaper:04030

Access Statistics for this paper

More papers in Discussion papers from Research Institute of Economy, Trade and Industry (RIETI) Contact information at EDIRC.
Bibliographic data for series maintained by TANIMOTO, Toko ().