There is no more heavily debated topic within macroeconomics than the causes of the Great Depression and why it came to an end. Even 80 years later, theories abound. And new theories keep coming. A recent NBER working paper by Margaret M. Jacobson, Eric M. Leeper, and Bruce Preston puts forward a compelling new theory. They argue that FDR’s policies helped pull the United States out of the Great Depression, but not in the way that previous economists have argued. Instead of simply focusing on FDR’s spending and its effect on aggregate demand, the authors also bring in another major policy used to fight the ... (full story)