*Prosper Raynold is Assistant Professor of Economics at Miami University. Thomas R. Beard is Alumni Professor of Economics and W. Douglas Mc-Millin is South Central Bell Business Partnership Professor of Economics at Louisiana State University. We are grateful to Richard J. Sweeney and two anonymous referees for their comments and suggestions. We also appreciate beneficial comments from George K. Davis, James S. Fackler, William K. Hutchinson, Norman C. Miller, and Randall E. Parker on earlier versions of the paper.
THE NONMONETARY EFFECTS OF FINANCIAL FACTORS DURING THE INTERWAR PERIOD
Article first published online: 28 SEP 2007
Volume 31, Issue 1, pages 87–99, January 1993
How to Cite
RAYNOLD, P., BEARD, T. R. and MCMILLIN, W. D. (1993), THE NONMONETARY EFFECTS OF FINANCIAL FACTORS DURING THE INTERWAR PERIOD. Economic Inquiry, 31: 87–99. doi: 10.1111/j.1465-7295.1993.tb00868.x
- Issue published online: 28 SEP 2007
- Article first published online: 28 SEP 2007
This paper employs vector autoregressions to estimate the nonmonetary effects of financial sector shocks on output and prices during the interwar period. Variance decompositions indicate that the nonmonetary financial proxies have significant and important effects. Impulse response functions indicate that most of the significant shocks to our financial crisis proxies have negative effects on output and prices. Focusing on the depressed conditions of the 1930s, historical decompositions indicate that the nonmonetay financial crisis variables are generally more important than the monetary base in explaining macro behavior. Our findings thus support theoretical models emphasizing the important nonmonetay effects of financial variables.