Monetary policy and the great crash of 1929: A bursting bubble or collapsing fundamentals?

Timothy Cogley

    Research output: Chapter in Book/Report/Conference proceedingChapter


    A number of economists have expressed concern that the stock market is overvalued. Some have compared the situation with the 1920s, warning that the market may be headed for a similar collapse. Indeed, some suggest that lax monetary policy contributed to the Great Crash and have argued that current monetary policy is also dangerously lax. The chapter argues that The Economist has misinterpreted the lessons of the Great Crash. The implication is that monetary policy was far more restrictive than a purely domestic perspective might suggest. In 1928 there was a synchronized, global contraction of monetary policy, which occurred primarily because the Fed was concerned about stock prices. In retrospect, it seems that the lesson of the Great Crash is more about the difficulty of identifying speculative bubbles and the risks associated with aggressive actions conditioned on noisy observations.

    Original languageEnglish (US)
    Title of host publicationHandbook of Monetary Policy
    PublisherTaylor and Francis
    Number of pages6
    ISBN (Electronic)9780585425511
    StatePublished - Jan 1 2020

    ASJC Scopus subject areas

    • General Social Sciences


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