Development and Underdevelopment in the History of Economic Thought

Towards a history of the financial accelerator mechanism: the contributions of Ben Bernanke and Mark Gertler (1981-2015)

Goulven Rubin, Université Paris 1 Panthéon-Sorbonne
Huguette Croisier, Université Saint Louis

In 2010, Michael Woodford, one of the main architects of the dominant approach in macroeconomics at the time, wrote: “what is needed is a framework for macroeconomics analysis in which intermediation plays a crucial role” (2010: 26). As underlined by Bruna Ingrao and Claudio Sardoni (2019) in a recent book, the fact that a macroeconomist could write this after a century of business cycle analysis may seem surprising and calls for an explanation. Our paper will try tackle this question by looking at the works of Ben Bernanke and Mark Gertler from the 1981 to the early years after the 2008 crisis. In 1983, Bernanke explored the cause of the depth and the length of the Great Depression and stressed the crucial role of financial intermediaries. Explaining how a financial crisis of great magnitude could develop was high on his agenda and so was the role of banks in such circumstances. Yet, when he came to the modelling of his insights, with the help of Mark Gertler, banks progressively receded to the background and the mechanism they obtained was not able to explain “market failures on a grand scale” (Mankiw and Romer, 1992). As stressed by Henri Sneessens (2017: 129), DSGE models of the early 2000s were totally unable to explain the depth of the crisis and how slow was the return to normal conditions. Our paper will study the evolution of Bernanke and Gertler’s research program from Bernanke’s early works on the Great Depression to the more recent contributions of Gertler and his co-authors (Gertler and Karadi, 2011; Gertler and Kiyotaki, 2015). Our aim will be to understand how and why financial intermediaries disappeared from the foreground in their models (see Kyotaki and Gertler, 2011), although their initial goal was to show the importance of the financial sector for business-cycle dynamics, a role that was only restored after the Great Recession.


Keywords: History of macroeconomics, financial accelerator, Bernanke, Gertler, financial crisis, business cycle theory