Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/23208
Authors: 
Cargill, Thomas F.
Mayer, Thomas
Year of Publication: 
2003
Series/Report no.: 
Working Paper No. 03-10
Abstract: 
The differential response of cash reserves of member banks and nonmember banks not subject to the 1936-37 increase in reserve requirements is estimated to determine whether the 1937-38 recession was caused by the increase in reserve requirements. We identify 17 states that maintained constant reserve requirements from June 1934 to June 1941. While member banks increased their cash reserve ratios relative to nonmember banks, the magnitude of the adjustment is too small to have contributed to the 1937-38 recession. Shock prices and public reaction to the increase in reserve requirements are consistent with the empirical results. While the Fed was responsible for the Great Contraction, the results are inconsistent with the view the Fed?s reserve requirement increase contributed significantly to the 1937-38 recession.
Subjects: 
excess reserves
Federal Reserve
Great Depression
reserve requirements
JEL: 
N12
E65
E32
Document Type: 
Working Paper

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