Did Monetary Forces Cause the Great Depression

216 Pages·1976·11.618 MB·English

by  Peter Temin

Did
Monetary
Forces
Cause
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fouorftt hlhea bfoorrw cauesn emplaonyde d,
inveshtamcdeo nmtteao v irsttuaanld still.
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surprhioswli intgit skl neo wanb oiutts
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varoifet thye otreoix epslh aoidwne pressions
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iniwnhgaa tc tuhaalplpyei nnte hbdei ggest
depreishnsi isotno ry.
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monesyu ppinlt yhe ea r1l9y3 t0hsoe;t her,
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econoumnicce rtmaaikneetssys ,er netaida­l
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tou nderstthiaenn tde ropfel caoyn omic
forces.
ISB0N:- 393-05561-2
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PETETRE MIN
MASSACHUSEITNTSST ITUOTFET ECHNOLOGY
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W ·W ·N ORTON & COMPAN·IY N C·
NEWY ORK
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simunletoauisnCl ayn abdyGa e orJg.Me c LeLoidm iTtoerdo,Pn rtion.t tehUden iitne d
StaotfAe mse rica.
FIRST EDITION
❖ The text of this book was typeset in Times Roman on the Variable Input Typesetter.
Composition, printing, and binding are by the Vail-Ballou Press, Inc.❖
LibroafCr oyn grCeastsa lionPg uibnlgi Dcaattai on
TemiPne,t er.
Dimdo netfoarrcyce asu tsheGe r eDaetp ression?
Bilbiroagpph.y :
Incliunddeesx .
1.Depressions-1S9t2a9t2-e.UsM n.oi nteeyd
supply-SUtnaitt3ee.sMd .o netpaocrlyyi- United
StatIe.Ts i.t le.
HB3711972 9.T34358 .5'74522- 8367
ISB0N- 393-05561-2
ISB0-N3 93-09p2b0k9.- 7
I 2 3 4 5 6 7 8 9
For my parents
CONTENTS
Tables and Figures ix
Preface xi
I. Introduction 1
II. The Role of Assumptions and Econometrics in the Analysis
of the Depression 13
The Money Hypothesis: Friedman and Schwartz,
14
The Spending Hypothesis: Econometric Studies, 31
Bank Failures in a Model of the Money Market, 53
III. Precipitating Factors 62
The Spending Hypothesis: Housing and the Stock-Market
Crash, 62
The Money Hypothesis: The Banking Crisis of 1930, 83
IV. Why the Stock of Money Fell
A Sketch of the Theory, 96
Changes in Interest-Rate Differentials, 103
The Fall in the Demand for Money,
121
V. The Deepening Depression 138
The Absence of Equilibrating Forces, 138
International Interactions,
145
Deflation, 160
VI. Conclusions
Appendices on Data
I. Data for Tables 8 and 9, 179
2. Sources for Tables 19-21 , 184
Bibliography 186
Index 195
TABLES AND FIGURES
Tables
1.R eaGlN Pa nSde leCcotmepdo ne1n9t1s9,- 39 4
2.T hMeo neSyt oacnkRd e laQtueadn t1i9tI9 i -e3s9, 5
3.A ggrePgraitIcened exI9e 1s9,- 39 6
4.P riacnePdsr ice-ERaartnoiifoCn sog msm oSnt oc1k9s2,7 -324 4
5.R egreRsessiuoolnntt hsEe f feocfBt asnF ka ilu1r9e2s1,-4 1 58
6.C hanigneR se aMla croecoVnaormiiaicbnT l hersPe eer iods6 4
7.P ropoorftt hiCeoh na nignIe vn e stmienV natr ious
ComponienTn htrsPe eer iods 65
8.E stimCaotnesdu mFputnicotn1i 9o1n9s-4,1
71
9.R esidfruoamCl osn sumFputnicotnUi soinDnsig f feDraetnat 72
10C.h aractoefCr oirsptoiBrcoasnt d1es9 ,1 5-39 81
11R.e greRsessiuoolnntt hsCe a usoefBs a nFka ilu1r9e2s9,- 31 89
12B.o nYdi ealndRd'>i sPkr emifuomDrsi ffeSraemnptl es,
1928-31
107
13M.e anasn Vda riaonfOc nees- MoYnitehlo dnGs o vernment
Secur1i9t2i9e-s3,1 114
14A.n aloyfsV iasr iabnyYc eeaa rn bdy S ecuTryiptey
Separa1t9e2l9y-,31 116
15A.n aloyfsV iasr iabnyBc oetS he cuTryiptaeyn Yde ar,
1929-31
117
16E.x ceosfAs v erBaogneYd i elodvset rhA ev erage
CertiYfiiec1la9dt2,e9 -31
119
17V. oluomfSe h ortC-rteeOdruimtta s ntdi1n9g2,8 -32 122
18U.. SN.a tiBoanlaalSn hceee1 t92,9
129
19F.l ow-ofD-aFtfuaonN rdo sn agricultural
Indivi1d9u2a7l-s3,2 131
20F.l ow-ofD-aFtfuaonN rdo sn finCaonrcpioarla1 t9i2o7n-s3,21 33
21F.l ow-ofD-aFtfuaonU rdn si ncorBpuosriante1es9ds2 e7s-,3 21 35
22R.e aEla rni1n9g2s5,- 34
139
X Tables and Figures
23. Estimates of the Real Money Supply, 1925-34 141
24. Effects of Fiscal Policy, 1929-39 144
25. Real Merchandise Exports and Imports, 1925-34 145
26. Ratio of the Price of Farm Products to the Wholesale Price
Index in Selected Years 147
27. The German Balance of Payments, 1924-29 145
28. The German National Product and Components in Constant
Prices, 1924-29 156
29. Changes in Prices in Three Periods 162
A-1. Residuals from Consumption Functions Involving Measured
Wealth: Postwar Coefficients 183
A-2. Residuals from Permanent-Income Consumption Functions 148
Figures
I. IS-LM Curves JOO
2. Yields on Selected Assets, 1929-32
104
3. One-Month Yields on Government Securities, 1929-3 I
115
4. Three Short-Term Interest Rates, Monthly, 1919-39
142
5. Two Short-Term Interest Rates, Monthly, 1919-39
125