Despite an outpouring of work by historians (including economic historians) and others on the subject of the Great Depression, macroeconomists have written surprisingly little on it since Temin (1976) versus Friedman and Schwartz (1963) debate of some years ago. During the hiatus, the macroeconomic issues raised by the events of the 1930s (such as the real effects of stock market volatility, bank failures, domestic and international debt problems, and protectionist pressures) have become more rather than less pressing. At the same time a stream of innovative research in macroeconomics has eroded the earlier mainstream consensus and reduced our confidence in received explanations of the Great Depression. This proposal requests funding for the first two years of a longer-term project to make a detailed and integrated analysis of the interwar period (1919-1941). The initial focus is on the development of a catalogue of sources of interwar data based on a review of primary and secondary historical materials. Attention shifts next to the study of two sets of substantive questions. First, what was the role of the apparent breakdown of the financial intermediation process in the initiation and propagation of the Depression ? The sources of problems and responses to crisis both of financial intermediaries (banks, savings and loans) and of private debtors, will be considered, using panel data wherever possible. Second, what were the determinants of aggregate supply during the interwar period ? Principal issues to be considered here include the persistence of unemployment, the role of the New Deal in the 1933-37 recovery, and the somewhat anomalous behavior during this period of real wages and productivity. This research should contribute significantly toward improving our understanding of the Great Depression era. Equally important, is the demonstration which it promises, of the value of this period as a "laboratory" for testing modern views about macroeconomic theory and policy.
