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Lecture 7 Outline

Lecture 7 Outline - B ANKING P ANICS A What happens during...

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Economics 134 Professor Christina Romer Spring 2012 Professor David Romer LECTURE 7 MONETARY FACTORS IN THE GREAT DEPRESSION FEBRUARY 7, 2012 I. M ONETARY A RRANGEMENTS IN THE 1920 S A. Early Federal Reserve B. Gold standard II. M ONETARY C ONTRACTION IN 1928 A. U.S. economy in the 1920s B. Fed tightens to stem stock market bubble C. Effect in the IS-LM model D. International repercussions III. M ONETARY F ACTORS AND THE 1929 P LUNGE A. Output plummets in late 1929 B. Fall in the real interest rate suggests a shift in IS curve C. Monetary policy immediately after the stock market crash IV.
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Unformatted text preview: B ANKING P ANICS A. What happens during a panic? B. Modeling the effect of a panic 1. Money market 2. IS-LM C. Role of a fall in expected inflation (to expected deflation) 1. Evidence of expected deflation 2. Impact in IS-LM model D. Why didn’t the Federal Reserve act? V. G OLD S TANDARD A. Transmission of Great Depression from U.S. to the rest of the world B. Was the Federal Reserve genuinely constrained by the gold standard? C. October 1931 VI. Conclusions A. Monetary factors were very important in the Depression. B. But there were other factors as well....
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