The Great Depression and the Great Recession: A View from Financial Markets

Francesco Bianchi

No 21056, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: C32 G01 G12 (search for similar items in EconPapers)
Date: 2015-03
Note: AP EFG ME
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Citations: View citations in EconPapers (2)

Published as Francesco Bianchi, 2019. "The Great Depression and the Great Recession: A View from Financial Markets," Journal of Monetary Economics, .

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Journal Article: The Great Depression and the Great Recession: A view from financial markets (2020)
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