The effects of the Great Depression in the US on the level of American consumption

Abstract

This study investigates the impact of the Great Depression on consumption in the United States economy, from 1929:Q4 to 1936:Q4. The empirical results show that the exploratory variables — personal income, Dow Jones index, currency in
circulation, number of business bankruptcies, and total exports — can explain the behavior of consumption. Notable contributions include: the use of consumption instead of production as the dependent variable; the Dow Jones index as a Granger cause of consumption; the exploratory variables in current prices affecting the dependent variable in constant prices; and, finally, the complementarity between Friedman’s and Keynes’s explanations of the Great Depression.