Inflation Expectations and Recovery from the Depression: Evidence from the Narrative Record
Department of Economics, Occidental College
Federal Reserve Board
This paper uses the historical narrative record to identify whether inflation expectations shifted during the second quarter of 1933, precisely as the recovery from the Great Depression took hold. The paper has three main findings: (1) inflation expectations changed dramatically during the second quarter of 1933; (2) Roosevelt’s communications strategy, primarily his public commitment to raise prices to pre-depression levels, along with key actions such as abandoning the gold standard, caused the shift in inflation expectations; and (3) monthly output growth increased by 4 to 7 percentage points as a result of the shift in expectations.
Number of Pages in PDF File: 69
Keywords: inflation expectations, Great Depression, narrative evidence, liquidity trap, regime change
JEL Classification: E31, E32, E42, N12working papers series
Date posted: September 13, 2013 ; Last revised: March 12, 2014
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