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How was the Quantitative Easing Program of the 1930s Unwound?

Matthew Jaremski, Gabriel Mathy

NBER Working Paper No. 23788
Issued in September 2017
NBER Program(s):The Program on the Development of the American Economy

Outside of the recent past, excess reserves have only concerned policymakers in one other period: the Great Depression. The data show that excess reserves in the 1930s were never actively unwound through a reduction in the monetary base. Nominal economic growth swelled required reserves while an exogenous reduction in monetary gold inflows due to war embargoes in Europe allowed excess reserves to naturally decline towards zero. Excess reserves fell rapidly in early 1941 and would have unwound fully even without the entry of the United States into World War II. As such, policy tightening was at no point necessary and could have contributed to the 1937-1938 Recession.

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Document Object Identifier (DOI): 10.3386/w23788

Published: Matthew Jaremski & Gabriel Mathy, 2017. "How was the Quantitative Easing Program of the 1930s Unwound?," Explorations in Economic History, . citation courtesy of

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