The Real Effects of Fed Intervention: Revisiting the 1920-1921 Depression

53 Pages Posted: 16 Sep 2018

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: August 31, 2018

Abstract

We provide causal evidence that discount rate changes by the Federal Reserve affected lending and economic output during the 1920-1921 depression. Our identification strategy exploits county-level variation in access to the Fed’s discount window. We implement this strategy with hand-collected data on banking and agriculture in Illinois. Intervention by the Fed temporarily lowered agricultural output, but caused debt-to-output levels to be persistently lower, lasting into the Great Depression. The underlying mechanism appears to be consolidation of farms and efficient reallocation of resources. Our findings call into question the conventional narrative that Fed policy was misguided during the 1920-1921 depression.

Keywords: History, Banking, Federal Reserve, Discount Window

JEL Classification: N12, E52, E58, G21

Suggested Citation

Carlin, Bruce I. and Mann, William, The Real Effects of Fed Intervention: Revisiting the 1920-1921 Depression (August 31, 2018). Available at SSRN: https://ssrn.com/abstract=3242429 or http://dx.doi.org/10.2139/ssrn.3242429

Bruce I. Carlin

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

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

William Mann (Contact Author)

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

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

Register to save articles to
your library

Register

Paper statistics

Downloads
32
Abstract Views
221
PlumX Metrics