COULD STABLE MONEY HAVE AVERTED THE GREAT CONTRACTION

We test the hypothesis that the Great Contraction would have been atte nuated had the Federal Reserve not allowed the money stock to decline. We simulate a model that estimates separate relations for output and the price level and assumes that output and price dynamics are not esp ecially sensitive to policy changes. The simulations include a strong and a weak form of Friedman's constant money growth rule. The results support the hypothesis that the Great Contraction would have been miti gated and shortened had the Federal Reserve followed a constant money growth rule.