NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Non-Monetary Effects of the Financial Crisis in the Propagation of the Great Depression

Ben S. Bernanke

NBER Working Paper No. 1054
Issued in 1983
NBER Program(s):   EFG

This paper examines the effects of the financial crisis of the 1930s onthe path of aggregate output during that period. Our approach is complementary to that of Friedman and Schwartz, who emphasized the monetary impact of the bank failures; we focus on non-monetary (primarily credit-related) aspects of the financial sector--output link and consider the problems of debtors as well as those of the banking system. We argue that the financial disruptions of 1930-33 reduced the efficiency of the credit allocation process; and that the resulting higher cost and reduced availability of credit acted to depress aggregate demand. Evidence suggests that effects of this type can help explain the unusual length and depth of the Great Depression.

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Document Object Identifier (DOI): 10.3386/w1054

Published: Bernanke, Ben S. "Non-Monetary Effects of the Financial Crisis in the Propagation of the Great Depression." The American Economic Review, Vol. 73, No. 3, (June 1983) pp. 257-276. citation courtesy of

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