Monetarist Interpretations of the Great Depression: An Evaluation and Critique [report]

Robert Gordon, James Wilcox
1978 unpublished
The paper examines two different aspects of macroeconomic behavior in the United States during the period between 1929 and 1941 --both the proximate determinants of the severity and duration of the slump in nominal income, and the factors influencing the division of those changes in nominal income between changes in the price level and in real output. The first question, the sources of nominal-income movements, has been the subject of much recent controversy and debate. the statistical analysis
more » ... tatistical analysis in the paper suggests that both extreme monetarist and nonmonetarist interpretations of the decade of the 1930s are unsatisfactory and leave interesting features of the data unexplained. The paper takes the intermediate view that both monetary and nonmonetary factors were important, and places considerable emphasis on the interaction among construction, consumption, the stock market, and the Hawley-Smoot tariff, in its explanation of the severity of the first two years of the contraction. The second section, on the nature of the aggregate supply response in the 1930s, concludes that neither the equilibrium aggregate supply approach nor the expectational Phillips curve approach appears at all adequate. The statistical relation appears to have been between price change and changes in unemployment or output. The similarity of the supply response in Europe to that in the U.S. both contradicts those who claim that New Deal legislation was mainly responsible for the U'.S. price-output pattern, and raises an interesting set of questions for further research.
doi:10.3386/w0300 fatcat:wd7m5cgj3zgbvbi2guoc3tvmaa