NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Macroeconomics of the Great Depression: A Comparative Approach

Ben S. Bernanke

NBER Working Paper No. 4814
Issued in August 1994
NBER Program(s):Economic Fluctuations and Growth, Monetary Economics

Recently, research on the causes of the Great Depression has shifted from a heavy emphasis on events in the United States to a broader, more comparative approach that examines the interwar experiences of many countries simultaneously. In this lecture I survey the current state of our knowledge about the Depression from a comparative perspective. On the aggregate demand side of the economy, comparative analysis has greatly strengthened the empirical case for monetary shocks as a major driving force of the Depression; an interesting possibility suggested by this analysis is that the worldwide monetary collapse that began in 1931 may be interpreted as a jump from one Nash equilibrium to another. On the aggregate supply side, comparative empirical studies provide support for both induced financial crisis and sticky nominal wages as mechanisms by which nominal shocks had real effects. Still unresolved is why nominal wages did not adjust more quickly in the face of mass unemployment.

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Document Object Identifier (DOI): 10.3386/w4814

Published: Journal of Money, Credit and Banking, February 1995, vol. 27, no. 1,pp. 1-28 citation courtesy of

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