This paper examines the role of currency and banking in the German financial crisis of 1931 for both Germany and the U.S. We specify a structural dynamic factor model to identify financial and monetary factors separately for each of the two economies. We find that monetary transmission through...

An important monetary transmission channel works through the impact of interest rate changes on non-financial firms' investment decisions. Higher monetary policy rates affect firms' investment decisions by raising the costs of external financing and lowering aggregate demand for goods and...