This NGDP comparison may not be fair

…but is interesting anyway. The chart shows NGDP for the 51 months following the trough in April 1933 and following the trough in June 2009.

Comparing Recoveries

It may not be a fair comparison because the spending fall in the Great Depression was much bigger than during the Great Recession. So one could think that ‘more slack’ would prompt a faster recovery (along the lines of Friedman´s plucking model).

But the size of the spending gap, or amount of slack, may have little to do with the character of the recovery. Just like the 1929-33 downturn was much more severe because monetary policy was magnitudes tighter than in 2008-09, the recovery was much more robust in 1933-37 because monetary policy was magnitudes more expansionary than in 2009-13. No, the Liquidity Trap argument doesn´t work because rates were extremely low in both instances.

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