Finance, Farms, and the Fed's Early Years

37 Pages Posted: 19 Jun 2017

See all articles by Bruce I. Carlin

Bruce I. Carlin

University of California, Los Angeles (UCLA) - Anderson School of Management

William Mann

University of California, Los Angeles (UCLA) - Anderson School of Management

Date Written: June 2017

Abstract

We provide causal evidence that discount rate changes by the Federal Reserve affected economic output in the 1920s. Our identification strategy exploits county-level variation in access to the Fed's discount window, and we implement this strategy with hand-collected data on banking and agriculture in Illinois in the early 20th century. The mechanism for the Fed's effect on agriculture was a bank credit channel, operating independently of any deflationary effect on money supply. Our findings suggest that the Fed deliberately managed transitory shocks during 1920-1921, mitigating debt burdens with which farms would struggle in the years leading to the Great Depression.

Suggested Citation

Carlin, Bruce I. and Mann, William, Finance, Farms, and the Fed's Early Years (June 2017). NBER Working Paper No. w23511. Available at SSRN: https://ssrn.com/abstract=2988732

Bruce I. Carlin (Contact Author)

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

William Mann

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

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