Working Paper: NBER ID: w15584
Authors: Michael D. Bordo; Harold James
Abstract: This paper examines three areas in which analogies have been made between the interwar depression and the financial crisis of 2007 which reached a dramatic climax in September 2008 with the collapse of Lehman Brothers and the rescue of AIG: they can be labeled macro-economic, micro-economic, and geo-political. First, the paper considers the story of monetary policy failures; second, there follows an examination of the micro-economic issues concerned with bank regulation and the reorganization of banking following the failure of one or more major financial institutions and the threat of systemic collapse; third, the paper turns to the issue of global imbalances and asks whether there are parallels that might be found in this domain too between the 1930s and the events of today.
Keywords: No keywords provided
JEL Codes: E58; N0; N12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Federal Reserve's tight monetary policy in 1928 (E52) | recession (E32) |
| recession (E32) | severity of the economic downturn (F44) |
| Federal Reserve's inaction as lender of last resort (E58) | severity of the Great Depression (N13) |
| tight monetary policy in 1928 (E65) | 1929 stock market crash (G01) |
| banking panics of early 1930s (E44) | severity of the Great Depression (N13) |
| similar banking failures and regulatory issues (G28) | comparable economic consequences (P50) |