The external finance premium and the financial accelerator Both real and monetary shocks produced the Great Depression, and in my 1983 paper I argued that banking and financial markets propagated both types of impulses, without distinguishing sharply between the two. My subsequent research and that of many others looked separately at the role of financial conditions in amplifying both monetary and nonmonetary influences.
On the nonmonetary side, Mark Gertler and I showed how, in principle, the effects of a real shock (such as a shock to productivity) on financial conditions could lead to persistent fluctuations in the economy, even if the initiating shock had little or no intrinsic persistence (Bernanke and Gertler, 1989).