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A New Interpretation of the Onset of the Great Depression

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  • Field, Alexander J.

Abstract

Over the 1919–1929 period, fluctuations in the value of stock trading on the New York Stock Exchange exercised statistically significant and economically important impacts on the demand to hold cash balances. The marked post–1925 rise in the volume and value of stock trading led to a measurable increase in the transactions demand to hold cash balances, an increase in demand not recognized or seriously discussed by individuals inside or outside of the system. Had it been recognized, it is unlikely that the Fed would have persisted in its antispeculative policies in 1928–1929, policies associated with rises in interest rates and the beginnings of a downturn in real activity in the second quarter of 1929.

Suggested Citation

  • Field, Alexander J., 1984. "A New Interpretation of the Onset of the Great Depression," The Journal of Economic History, Cambridge University Press, vol. 44(2), pages 489-498, June.
    • Handle: RePEc:cup:jechis:v:44:y:1984:i:02:p:489-498_03
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    Cited by:

    1. Mevlud Islami & Paul Welfens, 2013. "Financial market integration, stock markets and exchange rate dynamics in Eastern Europe," International Economics and Economic Policy, Springer, vol. 10(1), pages 47-79, March.
    2. Paul J.J Welfens, 2010. "European and Global Reform Requirements for Overcoming the Banking Crisis," EIIW Discussion paper disbei180, Universitätsbibliothek Wuppertal, University Library.
    3. Paul Welfens, 2014. "Issues of modern macroeconomics: new post-crisis perspectives on the world economy," International Economics and Economic Policy, Springer, vol. 11(4), pages 481-527, December.
    4. Michael D. Bordo & Barry Eichengreen, 1998. "Implications of the Great Depression for the Development of the International Monetary System," NBER Chapters, in: The Defining Moment: The Great Depression and the American Economy in the Twentieth Century, pages 403-454, National Bureau of Economic Research, Inc.
    5. Bordo, Michael D., 1986. "Explorations in monetary history: A survey of the literature," Explorations in Economic History, Elsevier, vol. 23(4), pages 339-415, October.
    6. Duca, John V., 2017. "The Great Depression versus the Great Recession in the U.S.: How fiscal, monetary, and financial polices compare," Journal of Economic Dynamics and Control, Elsevier, vol. 81(C), pages 50-64.
    7. Lawrence J. Christiano & Roberto Motto & Massimo Rostagno, 2003. "The Great Depression and the Friedman-Schwartz hypothesis," Proceedings, Federal Reserve Bank of Cleveland, pages 1119-1215.
    8. Barry Eichengreen, 1988. "Did International Economic Forces Cause The Great Depression?," Contemporary Economic Policy, Western Economic Association International, vol. 6(2), pages 90-114, April.
    9. Harold L. Cole & Lee E. Ohanian & Ron Leung, 2005. "Deflation and the International Great Depression: A Productivity Puzzle," NBER Working Papers 11237, National Bureau of Economic Research, Inc.
    10. Bradley Ewing & Mark Thompson & Mark Yanochik, 2007. "Using volume to forecast stock market volatility around the time of the 1929 crash," Applied Financial Economics, Taylor & Francis Journals, vol. 17(14), pages 1123-1128.
    11. Peter Temin, 1993. "Transmission of the Great Depression," Journal of Economic Perspectives, American Economic Association, vol. 7(2), pages 87-102, Spring.

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