Inflation expectations and recovery in spring 1933

Jalil, Andrew; Rua, Gisela

doi:10.1016/j.eeh.2016.07.001

Cited by 36 publications

(27 citation statements)

References 44 publications

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“…This narrative evidence points to a stronger hypothesis: in spring 1933 higher commodity prices not only provide evidence of expected inflation, but perhaps were themselves a source of expected inflation. This implies an interpretation of expected inflation in 1933 somewhat different from that in the prior literature (e.g., Jalil and Rua, 2016;Eggertsson, 2008). Whereas the prior literature emphasizes that Roosevelt's words and actions were crucial since they signaled a commitment to higher inflation, this narrative evidence suggests a more mechanical possibility: as the dollar weakened, commodity prices rose.…”

Section: Inflation Expectationsmentioning

confidence: 74%

Recovery from the Great Depression: The Farm Channel in Spring 1933

Hausman

Rhode

Wieland³

2017

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From March to July 1933, industrial production rose 57 percent. We show that an important source of recovery was the effect of dollar devaluation on farm prices, incomes, and consumption. Devaluation immediately raised traded crop prices, and auto sales grew more rapidly in states and counties most exposed to these price increases. The response was amplified in counties with more severe farm debt burdens. For plausible assumptions about farmers' relative MPC, the incidence of higher farm prices, and the aggregate multiplier, this redistribution to farmers accounted for a substantial portion of spring 1933 growth. This farm channel thus provides an example of how the distributional consequences of macroeconomic policies can have large aggregate effects. That recovery in 1933 benefited from redistribution to farmers suggests an important limitation to the use of 1933 as a guide to the effects of monetary regime changes in other circumstances.

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Section: Inflation Expectationsmentioning

confidence: 74%

Recovery from the Great Depression: The Farm Channel in Spring 1933

Hausman

Rhode

Wieland³

2017

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“…This narrative evidence points to a stronger hypothesis: in spring 1933 higher commodity prices not only provide evidence of expected inflation, but perhaps were themselves a source of expected inflation. This implies an interpretation of expected inflation in 1933 somewhat different from that in the prior literature (e.g., Jalil andRua 2016, Eggertsson 2008). Whereas the prior literature emphasizes that Roosevelt's words and actions were crucial since they signaled a commitment to higher inflation, this narrative evidence suggests a more mechanical possibility: as the dollar weakened, commodity prices rose.…”

Section: Inflation Expectationsmentioning

confidence: 62%

“…Recent work on the initial recovery in spring 1933 includes Eggertsson (2008), Jalil and Rua (2016), Sumner (2015), and Taylor and Neumann (2016). These authors credit Roosevelt with inducing inflation expectations and reducing ex ante real interest rates, thus stimulating demand for investment goods and consumer durables.…”

mentioning

confidence: 99%

Recovery from the Great Depression: The Farm Channel in Spring 1933

Hausman

Rhode

Wieland

2019

American Economic Review

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US industrial production rose 57 percent. We show that an important source of recovery was the effect of dollar devaluation on farm prices, incomes, and consumption. Devaluation immediately raised traded crop prices, and auto sales grew more rapidly in states and counties most exposed to these price increases. The response was amplified in counties with more severe farm debt burdens. For plausible assumptions about farmers' relative MPC, the incidence of higher farm prices, and the aggregate multiplier, this redistribution to farmers accounted for a substantial portion of spring 1933 growth. This farm channel thus provides an example of how the distributional consequences of macroeconomic policies can have large aggregate effects. That recovery in 1933 benefited from redistribution to farmers suggests an important limitation to the use of 1933 as a guide to the effects of monetary regime changes in other circumstances. (JEL E32, E65, N12, N52, Q11, Q12) " [T]he depression in the manufacturing industry of the country is due chiefly to the fact that agricultural products generally have been selling below the cost of production, and thereby destroyed the purchasing power

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“…Narrative evidence is helpful for a number of reasons and has been collected for the Great Depression in the United States, among others, by Jalil and Rua (2016), Nelson (1989) and Romer and Romer (2013). While quantitative inflation forecasts may depend on the specific method, and the choice of variables or parameters, narrative sources can verify and explain their outcomes.…”

Section: Introductionmentioning

confidence: 99%

“…Therefore, news sources are Figure 1: Industrial production in Germany and the United States 1925States to 1935States 1925States 1926States 1927States 1928States 1929States 1930States 1931States 1932States 1933States 1934States 1935 capable of identifying what was known to the general public and which information could be considered relevant for changes in inflation expectations and, moreover, could point to the actual sources of such shifts. This is important, because a shift towards inflation expectations should not be a purely statistical outcome, but it should be experienced by contemporaries as the result of an abrupt policy change, an event or a shock in order to be identified as a regime change (Jalil and Rua, 2016).…”

Section: Introductionmentioning

confidence: 99%

Inflation expectations and the recovery from the Great Depression in Germany

Daniel

Steege

2020

Explorations in Economic History

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A regime shift towards increased inflation expectations is credited with jumpstarting the recovery from the Great Depression in the United States. Germany experienced a recovery as fast and strong in the 1930s. What role did inflation expectations play at the start of this remarkable economic upturn? To answer this question, we study inflation expectations in Germany across two different methods: we conduct a narrative study of media sources and estimate inflation expectations from a FAVAR model. Consistently across these approaches, we do not find a shift to increased expected inflation. This recovery was different, and its causes lie elsewhere.

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Inflation expectations and recovery in spring 1933

Cited by 36 publications

References 44 publications

Recovery from the Great Depression: The Farm Channel in Spring 1933

Recovery from the Great Depression: The Farm Channel in Spring 1933

Recovery from the Great Depression: The Farm Channel in Spring 1933

Inflation expectations and the recovery from the Great Depression in Germany

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