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Why Did Prices Rise in the 1930s?

Published online by Cambridge University Press:  03 March 2009

Christina D. Romer
Affiliation:
Christina D. Romer is Professor of Economics, University of California, Berkeley, CA 94720-3880.

Abstract

Prices rose in most years between 1933 and 1941 even though output was substantially below trend. This inflation cannot be explained as simply the effect of devaluation and changes in expectations. Rather, because prewar price changes depended significantly on the growth rate of real output, the extraordinarily rapid growth after 1933 was an important force leading to inflation. At the same time, the NIRA, by encouraging minimum wages and collusive pricing arrangements, caused a crucial diminution of the usual deviation-from-trend effect. The conjunction of these forces caused inflation at a time when the U.S. economy remained depressed.

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Articles
Copyright
Copyright © The Economic History Association 1999

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