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Inflation Expectations and Recovery from the Depression in 1933: Evidence from the Narrative Record

82 Pages Posted: 13 Sep 2013 Last revised: 17 May 2015

Andrew Jalil

Occidental College

Gisela Rua

Board of Governors of the Federal Reserve System

Multiple version iconThere are 2 versions of this paper

Date Written: April 2015

Abstract

This paper uses the historical narrative record to determine whether inflation expectations shifted during the second quarter of 1933, precisely as the recovery from the Great Depression took hold. First, by examining the historical news record and the forecasts of contemporary business analysts, we show that inflation expectations increased dramatically. Second, using an event-studies approach, we identify the impact on financial markets of the key events that shifted inflation expectations. Third, we gather new evidence — both quantitative and narrative — that indicates that the shift in inflation expectations played a causal role in stimulating the recovery.

Keywords: inflation expectations, Great Depression, narrative evidence, liquidity trap, regime change

JEL Classification: E31, E32, E42, N12

Suggested Citation

Jalil, Andrew and Rua, Gisela, Inflation Expectations and Recovery from the Depression in 1933: Evidence from the Narrative Record (April 2015). Available at SSRN: https://ssrn.com/abstract=2325219 or http://dx.doi.org/10.2139/ssrn.2325219

Andrew Jalil

Occidental College ( email )

1600 Campus Rd
Los Angeles, CA 90041
United States

Gisela Rua (Contact Author)

Board of Governors of the Federal Reserve System ( email )

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

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