The Macroeconomics of the Great Depression: A Comparative Approach

53 Pages Posted: 14 Jun 2000  

Ben S. Bernanke

Board of Governors of the Federal Reserve System

Date Written: August 1994

Abstract

Recently, research on the causes of the Great Depression has shifted from a heavy emphasis on events in the United States to a broader, more comparative approach that examines the interwar experiences of many countries simultaneously. In this lecture I survey the current state of our knowledge about the Depression from a comparative perspective. On the aggregate demand side of the economy, comparative analysis has greatly strengthened the empirical case for monetary shocks as a major driving force of the Depression; an interesting possibility suggested by this analysis is that the worldwide monetary collapse that began in 1931 may be interpreted as a jump from one Nash equilibrium to another. On the aggregate supply side, comparative empirical studies provide support for both induced financial crisis and sticky nominal wages as mechanisms by which nominal shocks had real effects. Still unresolved is why nominal wages did not adjust more quickly in the face of mass unemployment.

Suggested Citation

Bernanke, Ben S., The Macroeconomics of the Great Depression: A Comparative Approach (August 1994). NBER Working Paper No. w4814. Available at SSRN: https://ssrn.com/abstract=226519

Ben S. Bernanke (Contact Author)

Board of Governors of the Federal Reserve System

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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