The Gold Standard, the Great Depression, and the Brilliance of NES Students…

Tomorrow’s lecture is, in part, covering a homework on the Great Depression in which the students were asked to redo some of a classic Bernanke and James article on the Great Depression. It’s a great article, although the empirics — like all empirics from the early 1990s — are quite dated. This actually makes it good to assign, in my view, as it makes it relatively easy for students to suggest improvements. The first time I assigned this, I had a student (A.A.) who wasn’t quite happy with the limited information contained in a regression of Industrial Production on gold standard status. Thus, she created this. It makes it clear, aside from the wonders of conditional formatting. There are two things this makes obvious: (1) the later you abandon the gold standard, the worse you did. And, (2) at first, if anything, the gold dead-enders were doing slightly better (or as well), but the further they went the worse they did. It blew my mind. Absolutely brilliant table for an undergraduate to turn in for a two page essay. Go back and have a look at the Bernanke/James tables and compare. There’s no comparison. I have a feeling she, and many others I’ve had the good fortune to teach, will go on to do great things).

Douglas Campbell, published in:

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