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Cited by 2,183Monetary Policy and Economic ImpactEconomic Theory and PolicyBanking stability, regulation, efficiency

The DOI matches its Crossref record; 42 of the 51 references it cites were found in a registry or an index; none of the 25 sources its claims cite is checked for support yet.

Non-Monetary Effects of the Financial Crisis in the Propagation of the Great Depression

Open access
Bernanke, Ben·1983·National Bureau of Economic Research
DOI 10.3386/w1054
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Abstract

This paper argues that disruptions in credit intermediation during 1930-33 deepened the Great Depression.

Overview

Integrity signals

Registry

Crossref · 10.3386/w1054

Cites

42 of 42 references verified0 citation errors · 0 not checkable

Statistics

Nothing to recompute.

Verification

Claims the paper makes

0 of 25 cited sources checked · 0 supported · 0 flagged

  • Probably not a substantial claim. 14
  • It may state two separate claims as one. 34
  • The quote only partly states this claim. 1
44 of 44

  • The authors state this as an assumption.

    Markets for financial claims are incomplete, so intermediation between some classes of borrowers and lenders requires nontrivial market-making and information-gathering services.

    “The basic premise is that, because markets for financial claims are incomplete, intermediation between some classes of borrowers and lenders requires nontrivial market-making and information-gathering services.”

  • The authors state this as an assumption.

    Banks specialize in making loans to small, idiosyncratic borrowers whose liabilities are too few to be publicly traded.

    “We assume, however, that banks specialize in making loans to small, idiosyncratic borrowers whose liabilities are too few in number to be publicly traded.”

  • The authors state this as an assumption.

    Good borrowers' projects generate a random return whose mean always exceeds the social opportunity cost of investment.

    “These projects generate a random return from a distribution whose mean will be assumed always to exceed the social opportunity cost of investment.”

  • The authors state this as an assumption.

    Bad borrowers have no project, squander any loan received in profligate consumption, then default.

    “Bad borrowers are assumed to squander any loan received in profligate consumption, then to default.”

  • The authors state this as an assumption.

    Banks choose operating procedures that minimize the cost of credit intermediation.

    “Banks presumably choose operating procedures that minimize the CCI.”

  • The paper relies on this without support.

    Debt contracts were written in nominal terms.

    “Given that debt contracts were written in nominal terms,15 the protracted fall in prices and money incomes greatly increased debt burdens.”

  • The authors state this as an assumption.

    The behavior of borrowers unaffected by credit market problems is unchanged.

    “Assume that the behavior of borrowers unaffected by credit market problems is unchanged.”

  • The authors state this as an assumption.

    The supervised bank closings of March 1933 had the same effect as an unsupervised bank crisis involving 15% as much in frozen deposits.

    “As a conservative compromise, we assumed that the”

  • The authors state this as an assumption.

    The liabilities of bank and business failures were not determined by anticipations of future output declines.

    “Assuming that these latter variables themselves were not determined by anticipations of future output declines (see below), the use of the fitted series from this regression”

  • The paper relies on this without support.

    Canada entered the Depression with a large external debt, much of it payable in foreign currencies.

    “Canada entered the Depression with a large external debt, much of it payable in foreign currencies.”

  • The paper relies on this without support.

    The combination of deflation and the devaluation of the Canadian dollar led to many defaults.

    “The combination of deflation and the devaluation of the Canadian dollar led to many defaults.”

  • The paper relies on this without support.

    Outputs of large and small businesses are potentially substitutes.

    “Unless it is believed that the outputs of large and of small businesses are not potentially substitutes, the aggregate supply effect must be regarded as not of great quantitative importance.”

  • The authors state this as an assumption.

    Bank suspensions and business bankruptcies were the product of factors beyond pure anticipations of output decline.

    “If it is accepted that bank suspensions and business bankruptcies were the product of factors beyond pure anticipations of output decline, then the evidence of this section supports the view that non-monetary aspects of the financial crisis were at least part of the propagatory mechanism of the Great Depression.”

  • The authors state this as an assumption.

    Failures of banks and commercial firms are not caused by anticipations of future changes in output.

    “To conclude that the observed correlations support the theory outlined in this paper requires an additional assumption, that failures of banks and commercial firms are not caused by anticipations of (future) changes in output.”

  • The paper relies on this without support.

    The countries in which banking crises occurred (the U.S., Germany, Austria, Hungary, and others) were among the worst-hit by the Depression.

    “The countries in which banking crises occurred (the U.S., Germany, Austria, Hungary, and others) were among the worst-hit by the Depression.”

  • The paper relies on this without support.

    International reserves included foreign currencies, notably the dollar and the pound; for countries other than the U.S. and the U.K., foreign exchange was 35% of total reserves.

    “International reserves included not only gold but also foreign currencies, notably the dollar and the pound; for countries other than the U.S. and the U.K., foregn exchange was 35% of total reserves.”

  • The paper relies on this without support.

    In 1931 expectations that the international financial system would collapse became self-fulfilling.

    “In 1931 expectations that the international financial system would collapse became self-fulfilling.”

  • The paper relies on this without support.

    Largely due to fixed exchange rates, the deflation of prices was worldwide.

    “Largely due to fixed exchange rates, the deflation of prices was worldwide.”

  • The paper relies on this without support.

    Countries with large nominal debts, notably agricultural exporters, became unable to pay.

    “Countries with large nominal debts, notably agricultural exporters (the case of Canada has been mentioied), became unable to pay.”

  • The paper relies on this without support.

    International capital flows were reduced to a trickle.

    “International capital flows were reduced to a trickle.”

  • The paper relies on this without support.

    Banking crises had never previous to this time been a necessary result of declines in output.

    “First, banking crises had never previous to this time been a necessary result of declines in output.”
21 of 21

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Citations

Cites

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Show all 51 references

9 of the 51 references couldn’t be matched to a known paper.

Research works printed but not linked: 15

  1. [12]12. Cone, Kenneth, unpublished dissertation, Stanford University, 1982.
  2. [16]16. Federal Reserve Bulletin, various issues.
  3. [19]19. Frederiksen, D.M., "Two Financial Roads Leading Out of Depression", Harvard Business Review, 10, no. 1 (October 1931), 131-I8.
  4. [21]21. Friedman, Milton, and Anna J. Schwartz, A MonetI !2.1 2! United State 1867-1960, Princeton: Princeton U. Press, 1963.
  5. [22]22. Goldsmith, Raymond, Financial Institutions in the American Econo Since 1900, Princeton: Princeton U. Press, 1958.
  6. [24]24. Gurley, John G. and E.S. Shaw, "Financial Aspects of Economic Development", American Economic Review, 115, no. 11 (September 1955), 515-38.
  7. [33]33. Minsky, Hyman P., "A Theory of Systematic Fragility", in E.I. Altman and A.W. Sametz, eds., Financial Crises, New York: Wiley-Interscience, 1977.
  8. [35]35. ___ "Does Anticipated Money Matter? An Econometric Investigation", Journal of Political Econo, 90, no. 1 (February 1982), 22-51.
  9. [39]39. Safrian, A.E., The Canadian Eonoj in the Great s1on, Toronto: U. of Toronto Press, 1959.
  10. [42]42. Stoddard, W.L., "Small Business Wants Capital", Harvard Business Review, 18, no. 3 (Spring 19110), 265-7'4. Surv of Current Business, v a rio u s I ss u e s. Temin, Peter, Did Moneta Forces Cause the Great !ression?, New York: W.W. Norton, 1976. Twentieth Century Fund, Debts and Recov 1929-1937, New York, 1938 (written by A.G. Hart). U.S. Department of Commerce, Historical Statistics of the UnIted States, 1975. National Income, 19511. impossible in a complete-markets world.
  11. [43]43. To concentrate on credit intermediation, we neglect the transactions and other services performed by banks.
  12. [46]46. Nugent (1939), pp. 11ZI_16. 31. Merwin (19L$2), p. 5 and p. 75. 32. Twentieth Century Fund, p. 163.
  13. [50]50. Federal Reserve Bulletin, 1937, pp. 866-7.
  14. [52]52. ZO. Cagan (1965) makes this point; see pp. 216, 227-8. The 1920-22
  15. [53]53. Brown (1956) has argued that New Deal fiscal policy was not very constructive. A paper by Michael Weinstein in the Brunner volume (exact reference to be found) pointed out counterproductive aspects of the N.R.A. 43. These passages are quoted in Stoddard (1940). 44. Ibid. 45. See Chandler (1970), pp. 150-51.

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Metadata

Authors
Bernanke, B.
Affiliations
Federal Reserve Board of Governors (US)
Corresponding author
Bernanke, Ben
Venue
National Bureau of Economic Research
Publisher
National Bureau of Economic Research
Published
1983-01
DOI
10.3386/w1054
OpenAlex
W1968450183
Cited by
2,173
References
51
Citations by year
2026: 24 · 2025: 87 · 2024: 77 · 2023: 81 · 2022: 86 · 2021: 83 · 2020: 118 · 2019: 120 · 2018: 92 · 2017: 85 · 2016: 116 · 2015: 79 · 2014: 107 · 2013: 82 · 2012: 80
Type
report
Language
en
Open access
Locations
  • National Bureau of Economic Research (publishedVersion)
  • RePEc: Research Papers in Economics (submittedVersion)
Topics
  • Social Sciences › Economics, Econometrics and Finance › General Economics, Econometrics and Finance › Monetary Policy and Economic Impact
  • Social Sciences › Economics, Econometrics and Finance › General Economics, Econometrics and Finance › Economic Theory and Policy
  • Social Sciences › Economics, Econometrics and Finance › Finance › Banking stability, regulation, efficiency
Keywords
Great Depression, credit allocation, credit constraints, aggregate production, aggregate demand, bank failures, financial services, debtors, banking sector

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