TY  - JOUR
AU  - Cooper,Russell
AU  - Corbae,Dean
TI  - Financial Fragility and the Great Depression
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 6094
PY  - 1997
Y2  - July 1997
UR  - http://www.nber.org/papers/w6094
L1  - http://www.nber.org/papers/w6094.pdf
N1  - Author contact info:
Russell Cooper
Department of Economics
The Pennsylvania State University
611 Kern
State College, PA 16802
E-Mail: russellcoop@gmail.com

Dean Corbae
Department of Economics
University of Wisconsin, Madison
1180 Observatory Drive
Madison, WI 53706
Tel: 608/609-2418
Fax: 608/263-3559
E-Mail: corbae@ssc.wisc.edu
AB  - We analyze a financial collapse, such as the one which occurred during the Great Depression, from the perspective of a monetary model with multiple equilibria.  The economy we consider contains financial fragility due to increasing returns to scale in the intermediation process.  Intermediaries provide the link between savers and firms who require working capital for production.  Fluctuations in the intermediation process are driven by variations in the confidence agents place in the financial system.  Our model matches quite closely the qualitative movements in some financial and real variables (the currency/deposit ratio, ex-post real interest rates, the level of intermediated activity, deflation, employment and production) during the Great Depression period.
ER  -