Baby-boom, baby-bust and the Great Depression

The baby-boom and subsequent baby-bust have shaped much of the history of the second half of the 20th century; yet it is still largely unclear what caused them. This paper presents a new unified explanation of the fertility Boom-Bust that links the latter to the Great Depression and the subsequent economic recovery. We show that the 1929 Crash attracted young married women 20 to 34 years old in 1930 (whom we name D-cohort) in the labor market possibly via an added worker effect. Using several years of Census micro data, we further document that the same cohort kept entering into the market in the 1940s and 1950s as economic conditions improved, decreasing wages and reducing work incentives for younger women. Its retirement in the late 1950s and in the 1960s instead freed positions and created employment opportunities. Finally, we show that the entry of the D-cohort is associated with increased births in the 1950s, while its retirement turned the fertility Boom into a Bust in the 1960s. The work behavior of this cohort explains a large share of the changes in both yearly births and completed fertility of all cohorts involved.

Stress testing credit risk: the Great Depression scenario

By employing Moody’s corporate default and rating transition data spanning the last 90 years we explore how much capital banks should hold against their corporate loan portfolios to withstand historical stress scenarios. Specifically, we will focus on the worst case scenario over the observation period, the Great Depression. We find that migration risk and the length of the investment horizon are critical factors when determining bank capital needs in a crisis. We show that capital may need to rise more than three times when the horizon is increased from 1 year, as required by current and future regulation, to 3 years. Increases are still important but of a lower magnitude when migration risk is introduced in the analysis. Further, we find that the new bank capital requirements under the so-called Basel 3 agreement would enable banks to absorb Great Depression-style losses. But, such losses would dent regulatory capital considerably and far beyond the capital buffers that have been proposed to ensure that banks survive crisis periods without government support.

Brazil and Turkey, a comparative analysis of both countries' economic development and institutional design from the Great Depression to the early 21st century

Apos uma década de rápido crescimento econômico na primeira década do século 21, Brasil e Turquia foram considerados duas das economias emergentes mais dinâmicas e promissoras. No entanto, vários sinais de dificuldades econômicas e tensões políticas reapareceram recentemente e simultaneamente nos dois países. Acreditamos que esses sinais e a sua simultaneidade podem ser entendidos melhor com um olhar retrospectivo sobre a história econômica dos dois países, que revela ser surpreendentemente paralela. Numa primeira parte, empreendemos uma comparação abrangente da história econômica brasileira e turca para mostrar as numerosas similaridades entre os desafios de política econômica que os dois países enfrentaram, assim como entre as respostas que eles lhes deram desde a virada da Grande Depressão até a primeira década do século 21. Essas escolhas de política econômica comuns dão forma a uma trajetória de desenvolvimento notavelmente análoga, caracterizada primeiro pela adoção do modelo de industrialização por substituição das importações (ISI) no contexto da recessão mundial dos anos 1930; depois pela intensificação e crise final desse modelo nos anos 1980; e finalmente por duas décadas de estabilização e transição para um modelo econômico mais liberal. Numa segunda parte, o desenvolvimento das instituições econômicas e políticas, assim como da economia política subjacente nos dois países, são analisados comparativamente a fim de prover alguns elementos de explicação do paralelo observado na primeira parte. Sustentamos que o marco institucional estabelecido nos dois países durante esse período também têm varias características fundamentais em comum e contribui a explicar as escolhas de política econômica e as performances econômicas comparáveis, detalhadas na primeira parte. Este estudo aborda elementos do contexto histórico úteis para compreender a situação econômica e política atual nos dois países. Potencialmente também constitui uma tentativa de considerar as economias emergentes numa perspectiva histórica e comparativa mais ampla para entender melhor as suas fraquezas institucionais e adotar um olhar mais equilibrado sobre seu potencial econômico.

Economic recovery from the Argentine great depression : institutions, expectations, and the change of macroeconomic regime

This work explores how Argentina overcame the Great Depression and asks whether active macroeconomic interventions made any contribution to the recovery. In particular, we study Argentine macroeconomic policy as it deviated from gold-standard orthodoxy after the final suspension of convertibility in 1929. As elsewhere, fiscal policy in Argentina was conservative, and had little power to smooth output. Monetary policy became heterodox after 1929. The first and most important stage of institutional change took place with the switch from a metallic monetary regime to a fiduciary regime in 1931; the Caja de Conversión (Conversion Office, a currency board) began rediscounting as a means to sterilize gold outflows and avoid deflationary pressures, thus breaking from orthodox "mIes of the game." However, the actual injections of liquidity were small' and were not enough to fully offset the incipient monetary contractions: the "Keynes" effect was weak or negative. Rather, recovery derived from changes in beliefs and expectations surrounding the shift in the monetary and exchange-rate regime,and the delinking of gold flows and the money base. Agents perceivod a new regime, as shown by the path of consumption, investment, and estimated ex ante real interest rates: the "Mundell" effect was dominant. Notably, this change of regime predated a later, and supposedly more significant, stage of institutional reform, namely the creation of the central bank in 1935. Still, the extent of intervention was weak, and insufficient to fully offset externaI shocks to prices and money. Argentine macropolicy was heterodox in terms of the change of regime, but still conservative in terms of the tentative scope of the measures taken .

What Ended the Great Depression? Re-Evaluating the Role of Fiscal Policy

Conventional wisdom contends that fiscal policy was of secondary importance for the economic recovery in the 1930s. The recovery is then connected to monetary policy that allowed non-sterilised gold inflows to increase the money supply. Often this is shown by measuring the fiscal multipliers and demonstrating that they were relatively small. This paper shows that problems with the conventional measures of fiscal multipliers in the 1930s may have created an incorrect consensus on the irrelevance of fiscal policy. The rehabilitation of fiscal policy is seen as a necessary step in the reinterpretation of the positive role of New Deal policies for the recovery.

Unconventional Monetary Policy and the Great Recession: Estimating the Macroeconomic Effects of a Spread Compression at the Zero Lower Bound

We explore the macroeconomic effects of a compression in the long-term bond yield spread within the context of the Great Recession of 2007–09 via a time-varying parameter structural VAR model. We identify a “pure” spread shock defined as a shock that leaves the policy rate unchanged, which allows us to characterize the macroeconomic consequences of a decline in the yield spread induced by central banks’ asset purchases within an environment in which the policy rate is constrained by the effective zero lower bound. Two key findings stand out. First, compressions in the long-term yield spread exert a powerful effect on both output growth and inflation. Second, conditional on available estimates of the impact of the Federal Reserve’s and the Bank of England’s asset purchase programs on long-term yield spreads, our counterfactual simulations suggest that U.S. and U.K. unconventional monetary policy actions have averted significant risks both of deflation and of output collapses comparable to those that took place during the Great Depression.

Unequally Unemployed: Labor Market Stratification After the Great Recession

Thesis (Ph.D.)--University of Washington, 2016-06

Climate change and financial regulation : challenges for the financial sector post the Global Financial Crisis

Regulation has played a significant role in shaping the financial services sector in Australia over the past few decades. Regulatory changes have included the establishment of the Australian Prudential Regulation Authority (APRA), floating the Australian dollar, allowing foreign financial institutions to operate domestically, the introduction of the superannuation guarantee charge, and the removal of interest rate controls. As the economy emerges from the worst financial crisis since the great depression, a new force of change that is recognised as one of the most significant sources of risk and opportunity facing the business community in the foreseeable future is that of climate change. Climate change is expected to be a significant change agent in the financial services sector as extreme weather patterns, sea level rises, and atmospheric changes impact on asset values (both investment and lending), project finance, and risk products. The financial services industry will be particularly affected by these developments, both as a provider of financial products (capital, credit, investment, advice, and insurance), and also through its powerful influence on the economy in terms of capital allocation. In addition, industry constituents will be heavily impacted by government regulation in this area (reporting, emissions trading and environmental policies), with respect to their own business practices and also those of their clients. This study reports the results of interviews conducted with senior members of the finance sector working in the sustainability area to gauge their perceptions of the challenges facing the sector with respect to climate change. Our results confirm that that regulatory intervention will be critical to climate change response gaining traction and momentum. In particular, regulatory certainty will promote engagement, particularly in relation to the Carbon Pollution Reduction Scheme (CPRS), with other developments needed in terms of information disclosure, performance and remuneration, and incentive programs. Accordingly, the significant potential risks and opportunities that climate change presents to the sector, and the broader economy, will in part be managed/realised only if a swift and significant regulatory response is achieved.

The value of tail risk hedging in defined contribution plans: What does history tell us

Hedging against tail events in equity markets has been forcefully advocated in the aftermath of recent global financial crisis. Whether this is beneficial to long horizon investors like employees enrolled in defined contribution (DC) plans, however, has been subject to criticism. We conduct historical simulation since 1928 to examine the effectiveness of active and passive tail risk hedging using out of money put options for hypothetical equity portfolios of DC plan participants with 20 years to retirement. Our findings show that the cost of tail hedging exceeds the benefits for a majority of the plan participants during the sample period. However, for a significant number of simulations, hedging result in superior outcomes relative to an unhedged position. Active tail hedging is more effective when employees confront several panic-driven periods characterized by short and sharp market swings in the equity markets over the investment horizon. Passive hedging, on the other hand, proves beneficial when they encounter an extremely rare event like the Great Depression as equity markets go into deep and prolonged decline.

Järjestö jäänmurtajana : Suomen merimiesunioni työmarkkinaosapuolena ja suomalaisten laivatyöntekijöiden turvallisuuden vankentajana 1944-1980

Like an Icebreaker: The Finnish Seamen s Union as collective bargaining maverick and champion of sailors social safety 1944-1980. The Finnish Seamen's Union (FSU), which was established on a national basis in 1920, was one of the first Finnish trade unions to succeed in collective bargaining. In the early 1930s, the gains made in the late 1920s were lost, due to politically based internal rivalries, the Great Depression, and a disastrous strike. Unexpectedly the FSU survived and went on promoting the well-being of its members even during World War II. After the war the FSU was in an exceptionally favorable position to exploit the introduction of coordinated capitalism, which was based on social partnership between unions, employers and government. Torpedoes, mines and confiscations had caused severe losses to the Finnish merchant marine. Both ship-owners and government alike understood the crucial importance of using the remaining national shipping capacity effectively. The FSU could no longer be crushed, and so, in 1945, the union was allowed to turn all ocean-going Finnish ships into closed shops. The FSU also had another source of power. After the sailors of the Finnish icebreaker fleet also joined its ranks, the FSU could, in effect, block Finnish foreign trade in wintertime. From the late 1940s to the 1960s the union started and won numerous icebreaker strikes. Finnish seamen were thus granted special pension rights, reductions on income taxes and import duties, and other social privileges. The FSU could neither be controlled by union federations nor intimidated by employers or governments. The successful union and its tactically clever chairperson, Niilo Välläri, were continuously but erroneously accused of syndicalism. Välläri did not aim for socialism but wanted the Finnish seamen to get all the social benefits that capitalism could possibly offer. Välläri s policy was successfully followed by the FSU until the late 1980s when Finnish ship-owners were allowed to flag their vessels outside the national registry. Since then the FSU has been on the defensive and has yielded to pay cuts. The FSU members have not lost their social benefits, but they are under constant fear of losing their jobs to cheap foreign labor.

"Köyhyydestä ei puhuttu, sitä vaan elettiin." : Köyhyyden kokemus ja selviytyminen 1930-luvun pulan oloissa Suomen maaseudulla

On the material level of poverty, the work shows how the Great Depression forced rural women and children to enhance their work input and find new ways of coping. The most serious impact of the Depression was poor nutrition, as well as scarcity of food and clothes. Women's and men's ways to make a living started to resemble each other; men had also to consent to wages in form of foodstuff. The research also focuses on immaterial poverty by means of exploring experiences of otherness: shame, hatred and expressions of protest. Substantial humiliation was induced by poor relief and begging. A clear gap prevailed between the poor and the better off people in school, work and at leisure. The economic crisis deepened this gap even further. The dissertation specifies the poor people s every day experiences by taking into account the different worlds of men and women. The analysis of four different memory-based sources is the core in the micro-historical research design. The narrators of the research were survivors, unlike many others, who experienced the Great Depression. Moralization and humiliation of the poor have not ceased in contemporary society. Therefore, the historical perspective of both the material and the immaterial side of poverty could increase the understanding of the multifaceted phenomenon of today s poverty.

Gold Standard and Reforms of The International Monetary System

This academic work is based on the study of the gold standard, its evolution over the years, their periods of boom and crisis. We will also discuss the arguments that some economists back the return to this monetary system.