Recovery of 1933 / Margaret M. Jacobson, Eric M. Leeper, Bruce Preston.

Format:

Book

Author/Creator:

Jacobson, Margaret M.

Contributor:

National Bureau of Economic Research.

Leeper, Eric M.

Preston, Bruce.

Series:

Working Paper Series (National Bureau of Economic Research) no. w25629.

NBER working paper series no. w25629

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2019.

Summary:

When Roosevelt abandoned the gold standard in April 1933, he converted government debt from a tax-backed claim to gold to a claim to dollars, opening the door to unbacked fiscal expansion. Roosevelt followed a state-contingent fiscal rule that ran nominal-debt-financed primary deficits until the price level rose and economic activity recovered. Theory suggests that government spending multipliers can be substantially larger when fiscal expansions are unbacked than when they are tax-backed. VAR estimates using data on "emergency" unbacked spending and "ordinary" backed spending confirm this prediction and find that primary deficits made quantitatively important contributions to raising both the price level and real GNP after 1933. VAR evidence does not support the conventional monetary explanation that gold revaluation and gold inflows, which raised the monetary base, drove the recovery independently of fiscal actions.

Notes:

Print version record

March 2019.