The Great Depression and the Great Recession: A view from financial markets

Journal Article (Journal Article)

Similarities between the Great Depression and the Great Recession are documented with respect to the behavior of financial markets. A Great Depression regime is identified by using a Markov-switching VAR. The probability of this regime has remained close to zero for many decades, but spiked for a short period during the most recent financial crisis, the Great Recession. The Great Depression regime implies a collapse of the stock market, with small-growth stocks outperforming small-value stocks. A model with financial frictions and uncertainty about policy makers’ intervention suggests that policy intervention during the Great Recession might have avoided a second Great Depression. A multi-country analysis shows that the Great Depression and Great Recession were not like any other financial crises.

Full Text

Duke Authors

Cited Authors

  • Bianchi, F

Published Date

  • October 1, 2020

Published In

Volume / Issue

  • 114 /

Start / End Page

  • 240 - 261

International Standard Serial Number (ISSN)

  • 0304-3932

Digital Object Identifier (DOI)

  • 10.1016/j.jmoneco.2019.03.010

Citation Source

  • Scopus