1993 Articles

Financial Factors in the Great Depression

Calomiris, Charles W.

Beginning with Irving Fisher (1933) and John Maynard Keynes (1931 B [1963]), macroeconomists have argued that financial markets were important sources and propagators of decline during the Great Depression. Turning points during the Depression often coincided with or were preceded by dramatic events in financial markets: stock market collapse, waves of bankruptcy and bank failure, and contractions in the money stock. But the mechanism through which financial factors contributed to the Depression has been a source of controversy, as has been the relative importance of financial factors in explaining the origins and persistence of the Depression.