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Non? Standard Monetary Policy Measures And Monetary Developments

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Executive Summary

Standard accounts of the Great Depression (notably the seminal offering of Friedman and Schwartz, 1963) attribute an important causal role to monetary policy errors in accounting for the catastrophic collapse in economic activity observed in the early 1930s. In particular, the Federal Reserve's failure to halt the collapse in the money stock following the banking crisis of 1931 is seen as a crucial mistake.2 While views vary on the relative importance of money versus credit contraction in the propagation of this policy error to the wider economy and ultimately price developments, 3 a broad consensus exists in the economics profession around the view that the collapse in financial intermediation was a crucial intermediary step.

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