The Meaning of Money in the Great Depression

Hugh Rockoff

NBER Historical Working Paper No. 52
Issued in December 1993
NBER Program(s):   DAE

The quality of the money stock declined during the banking crises of the early 1930s. Bank deposits did not serve as a secure short- term store of purchasing power for use in an emergency as well as they had previously, and during the periods of restricted deposits in late 1932 and early 1933, bank deposits could not fulfill their basic function of being a medium of exchange. This paper presents some evidence to show that the decline in the quality of the money stock contributed to the severity of the contraction.

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