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

Abstract

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.

Macroeconomic Effects of Debt Relief: Consumer Bankruptcy Protections in the Great Recession

“…Second, we can speculate on what would happen in an alternative model in which savers also had high MPCs but were located in the foreign region. Such a model would generate positive relative multipliers but a zero aggregate multiplier (see for example Hausman, Rhode and Wieland 2019). A model along these lines would generate much smaller relative multipliers, and be inconsistent with our empirical results.…”

“…In another related contribution, Hausman, Rhode and Wieland (2019) analyze the effect of redis-tribution from dollar devaluation during the early 1930s. They show that this redistribution led to a substantial economic response of farmers, especially in areas with a high farm debt burden, and they use a general equilibrium framework to scale up their estimates.…”

Financial Asset Ownership and Political Partisanship: Liberty Bonds and Republican Electoral Success in the 1920s

“…Essentially, this was the symmetric opposite of the "farm channel" effects of the dollar depreciation in 1933(Hausman, Rhode, and Wieland 2019).…”

Collateral Damage: The Impact of Foreclosures on New Home Mortgage Lending in the 1930s

“…Fishback (2017) provides a survey of the growing literature in this area. Several papers have focused narrowly on the sharp turnaround during the spring of 1933, including Hausman, Rhode, and Wieland (2017), Taylor and Neumann (2016), Jalil andRua (2015), andEggertson (2008). Other papers examine the longer period of recovery that lasted up to World War II, including Fishback, Horrace and Kantor (2005) and Fishback and Kachanovskaya (2015).…”