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Could Stable Money Have Averted The Great Contraction?

Michael Bordo (), Ehsan Choudhri () and Anna Schwartz

No 4481, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We test the hypothesis that the Great Contraction would have been attenuated had the Fed not allowed the money stock to decline. We do so by simulating a model that estimates separate relations for output and the price level and assumes that output and price dynamics are not especially sensitive to policy changes. The simulations include a strong and a weak form of Friedman's constant money growth rule. The results support the hypothesis that the Great Contraction would have been mitigated and shortened had the Fed followed a constant money growth rule.

JEL-codes: E50 (search for similar items in EconPapers)
Date: 1993-10
Note: ME
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Published as Economic Inquiry, vol. XXXIII, no. 3, pp. 484-505, (July 1995).

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Journal Article: Could Stable Money Have Averted the Great Contraction? (1995)
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