Date of Degree


Document Type


Degree Name





Michael Edelstein

Subject Categories

Economic History | Economics


fiscal policy, SVAR, world war ii


This dissertation contains three essays exploring the effect of fiscal policy shocks on savings and lending behavior of the private economy. Two essays focus on World War II and one essay focuses on the entire postwar period. Essay I looks at the response of monetary policy to fiscal policy shocks and the effect of fiscal policy on the private sector's balance sheet over a period that covers 1954 and 2007. I find a minimal response of the Federal Reserve to fiscal policy shocks. I also find the the main response of the private sector to fiscal policy shocks manifests itself in household assets. Long term assets in particular react very strongly. Essay II establishes the important role of savings during and immediately after World War II. I show that the unexpectedly high savings rates that persisted after the war ended was driven by the fact that housing purchases are counted as a kind of savings. Treating housing as a durable consumption good produces the negative savings expected. Essay III looks at the behavior of commercial banks in the period 1940 to 1955. I find that there is a--both economic and statistically--significant negative effect of war spending on total assets, mortgage lending, and commercial, industrial and agricultural loans made by commercial banks throughout the war and until 1949. The response of bank assets during the immediate postwar period is indicative of the unusual pattern of output and the money supply between 1946 and 1950. All this is taken as evidence that reconversion was not as smooth and robust as commonly argued.