Could Stable Money Have Averted the Great Contraction?

33 Pages Posted: 24 Jan 2007

See all articles by Michael D. Bordo

Michael D. Bordo

Rutgers University, New Brunswick - Department of Economics; National Bureau of Economic Research (NBER)

Anna J. Schwartz

City University of New York (CUNY); National Bureau of Economic Research (NBER) - NY Office

Ehsan U. Choudhri

Carleton University - Department of Economics

Date Written: October 1993

Abstract

We test the hypothesis that the Great Contraction would have been attenuated had the Fed not allowed the money stock to decline. We do so by simulating a model that estimates separate relations for output and the price level and assumes that output and price dynamics are not especially sensitive to policy changes. The simulations include a strong and a weak form of Friedman's constant money growth rule. The results support the hypothesis that the Great Contraction would have been mitigated and shortened had the Fed followed a constant money growth rule.

Suggested Citation

Bordo, Michael D. and Schwartz, Anna J. and Choudhri, Ehsan U., Could Stable Money Have Averted the Great Contraction? (October 1993). NBER Working Paper No. w4481. Available at SSRN: https://ssrn.com/abstract=480257

Michael D. Bordo (Contact Author)

Rutgers University, New Brunswick - Department of Economics ( email )

New Brunswick, NJ
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Anna J. Schwartz

City University of New York (CUNY) ( email )

17 Lexington Avenue
New York, NY 10010
United States

National Bureau of Economic Research (NBER) - NY Office

365 Fifth Avenue, 5th Floor
New York, NY 10016-4309
United States
212-817-7957 (Phone)

Ehsan U. Choudhri

Carleton University - Department of Economics ( email )

1125 Colonel By Drive
Ottawa, Ontario
Canada

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