Year: 2011
Type: report
Abstract: The Recession of 1937-38 is often cited as illustrating the dangers of withdrawing fiscal and monetary stimulus too early in a weak recovery.Yet our understanding of this severe downturn is incomplete: existing studies find that changes in fiscal policy were small in comparison to the magnitude of the downturn and that higher reserve requirements were not binding on banks.This paper focuses on a neglected change in monetary policy, the sterilization of gold inflows during 1937, and finds that it exerted a powerful contractionary force during this period.The transmission of this monetary shock to the real economy appears to have worked through lower asset (equity) prices and higher interest rates.
DOI: 10.3386/w17595
Author: Douglas Irwin
Institutions: Dartmouth College, National Bureau of Economic Research
Language: English
Domain: Social Sciences
Open Access status: green
Funder: Dartmouth College
OpenAlex ID: W2119944673