Member Bank Borrowing and the Fed's Contractionary Monetary Policy during the Great Depression

David C. Wheelock

48 citations0/0 files storedJournal of money credit and banking

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Monetary Policy and Economic Impact Banking stability, regulation, efficiency Economic theories and models

Abstract

This paper examines the causes of Federal Reserve policy errors during the Great Depression. It finds compelling evidence that the Fed developed a flawed strategy during the 1920s, and continued to use that strategy during the depression. The Fed's strategy relied on the behavior of member bank borrowing and interest rates as policy indicators. A detailed empirical examination of borrowed reserve demand reveals the errors in the Fed's strategy and helps to explain why the Fed did not undertake vigorous countercyclical policy during the depression. Copyright 1990 by Ohio State University Press.

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References

2017A Monetary History of the United States, 1867-1960 1964A Monetary History of the United States, 1867-1960 2024Nonmonetary Effects of the Financial Crisis in the Propagation of the Great Depression 1987Monetary factors in the great depression 1976Monetary and other explanations of the start of the great depression 1984Monetary Policy, Loan Liquidation, and Industrial Conflict: The Federal Reserve and the Open Market Operations of 1932 1972American Monetary Policy, 1928-1941.1963Free Reserves and the Money Supply

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1998The Growing Reluctance to Borrow at the Discount Window: An Empirical Investigation 2013The Federal Reserve and Panic Prevention: The Roles of Financial Regulation and Lender of Last Resort 2006Monetary Intervention Mitigated Banking Panics During the Great Depression: Quasi-Experimental Evidence from the Federal Reserve District Border in Mississippi, 1929 to 1933 2013The Promise and Performance of the Federal Reserve as Lender of Last Resort 1914–1933 2006Quarterly Data on the Categories and Causes of Bank Distress During the Great Depression

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