What Made The Great Depression so Great? Part Two
Friedman and Schwartz’s account of the 1930's have become a mainstream view in macroeconomics and has been highly influential to many economist's research however has not been universally accepted. Many economists have tried to build upon their view or fill in gaps. Temin notes that the monetary view suggested by Friedman and Schwartz is not satisfactory. Temin’s view is that the Great Depression was caused by an exogenous decline in investment and consumption behaviour. Romer and Romer (2012) wrote a paper to fill in the gaps they found in Friedman and Schwartz’s explanation. Their paper demonstrated that for monetary explanation to be correct, it was not enough to state that there were expectations of deflation in the early 1930's but that they must be a result of monetary contraction. Romer and Romer also state that they suspect that even Friedman and Schwartz would agree that non-monetary forces were also important, especially in the first year of the Grea...
