Friday, December 19, 2008

Transaction Costs and the Great Depression

I stumbled across a very interesting article from 1992 by our current Fed Chairman, Ben Bernanke: http://fraser.stlouisfed.org/docs/MeltzerPDFs/bernon83.pdf

In it, he discusses what is essentially a transaction cost approach to the Great Depression - arguing that uncertainty about borrowers substantially raised the "cost of credit intermediation". A scary proposition, because we are certainly facing these types of problems now... Senate Republicans themselves have bemoaned it.

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