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A Monetary Explanation for the Recession of 1797

Author

Listed:
  • Nicholas A. Curott

    (Ball State University)

  • Tyler A. Watts

    (East Texas Baptist University)

Abstract

Credit expansion by Bank of the United States in the early 1790s unleashed an investment bubble in real estate, manufacturing, and infrastructure projects. Domestic inflation created a disparity in international prices that led to a reduction in net exports and eventual specie outflow and deflation. An ensuing credit crunch brought a recession involving declines in prices and nominal GDP, the bursting of the land bubble, and a cluster of business and personal bankruptcies. We detail changes in credit, the price level, and interest rates caused by this expansion, as well investment errors that these conditions spawned.

Suggested Citation

  • Nicholas A. Curott & Tyler A. Watts, 2018. "A Monetary Explanation for the Recession of 1797," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 44(3), pages 381-399, June.
    • Handle: RePEc:pal:easeco:v:44:y:2018:i:3:d:10.1057_s41302-017-0092-3
    DOI: 10.1057/s41302-017-0092-3
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    References listed on IDEAS

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    1. repec:pra:mprapa:117955 is not listed on IDEAS
    2. Nicholas A. Curott & Tyler Watts & Benjamin R. Thrasher, 2020. "Government-Cheerleading Bias in Money and Banking Textbooks," Econ Journal Watch, Econ Journal Watch, vol. 17(1), pages 1-98–151, March.

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