Could Stable Money Have Averted The Great Contraction?
Michael Bordo (),
Ehsan Choudhri () and
No 4481, NBER Working Papers from National Bureau of Economic Research, Inc
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)
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Published as Economic Inquiry, vol. XXXIII, no. 3, pp. 484-505, (July 1995).
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Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:4481
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