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Did The Fed Respond To Liquidity Shortage Episodes During The Great Depression?

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  • Damette, Olivier
  • Parent, Antoine

Abstract

The October 1929 crash led to a complete freeze of New York open markets. Studying the Fed monetary policy conduct in a nonlinear framework, using credit spreads between open market rates and the Fed's instrument rates as a proxy for liquidity risk, we present econometric evidence that the Fed was well aware of such risks as early as 1930, reacted to the financial stress and altered its monetary policy in consequence. Our outcomes revisit conventional wisdom about the presumed passivity of the Fed throughout the 30s.

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  • Damette, Olivier & Parent, Antoine, 2018. "Did The Fed Respond To Liquidity Shortage Episodes During The Great Depression?," Macroeconomic Dynamics, Cambridge University Press, vol. 22(7), pages 1727-1749, October.
    • Handle: RePEc:cup:macdyn:v:22:y:2018:i:07:p:1727-1749_00
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    Cited by:

    1. Etienne Farvaque & Antoine Parent & Piotr Stanek, 2018. "Debates and dissident inside the FOMC during WW2," Post-Print hal-03567133, HAL.
    2. repec:spo:wpmain:info:hdl:2441/2cuu3uj58199fphtovctj05ish is not listed on IDEAS
    3. repec:hal:spmain:info:hdl:2441/2cuu3uj58199fphtovctj05ish is not listed on IDEAS

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