Sources of Output Fluctuations During the Interwar Period: Further Evidence on the Causes of the Great Depression

45 Pages Posted: 24 Jul 2007 Last revised: 24 Jan 2022

See all articles by Stephen G. Cecchetti

Stephen G. Cecchetti

National Bureau of Economic Research (NBER); Brandeis International Business School; Centre for Economic Policy Research (CEPR)

Georgios Karras

University of Illinois at Chicago - Department of Economics

Date Written: April 1992

Abstract

This paper decomposes output fluctuations during the 1913 to 1940 period into components resulting from aggregate supply and aggregate demand shocks. We estimates a number of different models, all of which yield qualitatively similar results. While identification is normally achieved by assuming that aggregate demand shocks have no long run real effects, we also estimate models that allow demand shocks to permanently affect output. Our findings support the following three conclusions: (i) there was a large negative aggregate demand shock in November 1929, immediately after the stock market crash; (ii) aggregate demand shocks are mainly responsible for the decline in output through mid to late 1931; (iii) beginning in mid 1931 there is an aggregate supply collapse that coincides with the onset on severe bank panics.

Suggested Citation

Cecchetti, Stephen G. and Cecchetti, Stephen G. and Karras, Georgios, Sources of Output Fluctuations During the Interwar Period: Further Evidence on the Causes of the Great Depression (April 1992). NBER Working Paper No. w4049, Available at SSRN: https://ssrn.com/abstract=476170

Stephen G. Cecchetti (Contact Author)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States
212-720-8629 (Phone)
212-720-2630 (Fax)

Brandeis International Business School ( email )

415 South Street
Waltham, MA 02453
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Georgios Karras

University of Illinois at Chicago - Department of Economics ( email )

725 University Hall (UH)
Chicago, IL 60607-7121
United States
312-996-2683 (Phone)
312-996-3344 (Fax)

HOME PAGE: http://www.uic.edu/~gkarras/

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
25
Abstract Views
816
PlumX Metrics