Depression Econometrics

Pooyan Amir Ahmadi & Albrecht Ritschl
The prominent role of monetary policy in the U.S. interwar depression has been conventional wisdom since Friedman and Schwartz [1963]. This paper presents evidence on both the surprise and the systematic components of monetary policy between 1929 and 1933. Doubts surrounding GDP estimates for the 1920s would call into question conventional VAR techniques. We therefore adopt the FAVAR methodology of Bernanke, Boivin, and Eliasz [2005], aggregating a large number of time series into a few...
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