Reinhart, Carmen and Reinhart, Vincent (2009): When the North Last Headed South: Revisiting the 1930s.
Download (562Kb) | Preview
The U.S recession of 2007 to 2009 is unique in the post-World-War-II experience by the broad company it kept. Activity contracted around the world, with the advanced countries of the North experiencing declines in spending normally the purview of the developing economies of the South. The last time that the economies of the North similarly headed south was the 1930s. This paper examines the role of policy in fostering recovery in that decade. With nominal short-term interest rates already near zero, monetary policy in most countries took the unconventional step of delinking currencies from the gold standard. However, analysis of a sample that includes developing countries shows that this was not as universally effective as often claimed, perhaps because the exit from gold was uncoordinated in time, scale, and scope and, in many countries, failed to bring about a substantial depreciation against the dollar. Fiscal policy was also active in the 1930s—many countries sharply increased government spending—but prone to reversals that may have undermined confidence. Countries that were more consistent in keeping spending high tended to recover more quickly.
|Item Type:||MPRA Paper|
|Original Title:||When the North Last Headed South: Revisiting the 1930s|
|Keywords:||debt, fiscal policy, exchange rates, monetary policy, depression, international, crisis|
|Subjects:||N - Economic History > N1 - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations
N - Economic History > N1 - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations > N10 - General, International, or Comparative
F - International Economics > F3 - International Finance
H - Public Economics > H6 - National Budget, Deficit, and Debt
|Depositing User:||Carmen Reinhart|
|Date Deposited:||11. May 2010 10:45|
|Last Modified:||13. Feb 2013 05:43|
Akerlof, George A., and Robert J. Shiller. 2009. Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism. Princeton University Press.
Barro, Robert J., and José F. Ursúa. 2008. "Macroeconomic Crises since 1870." BPEA, no. 1: 255-350.
Bernanke, Ben S. 2004. Essays on the Great Depression. Princeton University Press.
Bernanke, Ben S., and Vincent R. Reinhart. 2004. “Conducting Monetary Policy at Very Low Short-Term Interest Rates.” American Economic Review 94, no. 2: 85-90.
Board of Governors of the Federal Reserve. 1943. Banking and Monetary Statistics, 1890-1941. Washington.
Cagan, Phillip. 1965. Determinants and Effects of Changes in the Stock of Money, 1875-1960. Columbia University Press.
Calvo, Guillermo A., and Carmen M. Reinhart. 2002. “Fear of Floating.” Quarterly Journal of Economics 117, no. 2: 379-408.
Choudhri, Ehsan U., and Levis A. Kochin. 1980. "The Exchange Rate and the International Transmission of Business Cycle Disturbances: Some Evidence from the Great Depression." Journal of Money, Credit and Banking 12, no. 4, part 1: 565-74.
Eichengreen, Barry. 1992. Golden Fetters: The Gold Standard and the Great Depression 1919-1939. Oxford University Press.
Eichengreen, Barry, and Kevin H. O’Rourke. 2009. “A Tale of Two Depressions.” VoxEU www.voxeu.org/index.php?q=node/3421 (June).
Eichengreen, Barry, and Jeffrey Sachs. 1985. “Exchange Rates and Economic Recovery in the 1930s.” Journal of Economic History 45, no. 4: 925-46.
_________. 1986. “Competitive Devaluation and the Great Depression: A Theoretical Reassessment.” Economics Letters 22, no. 1: 67-71.
Eichengreen, Barry, and Peter Temin. 2000. “The Gold Standard and the Great Depression.” Contemporary European History 9, no. 2: 183-207.
Friedman, Milton, and Anna Jacobson Schwartz. 1963. A Monetary History of the United States, 1867-1960. Princeton University Press.
Hamilton, James D. 1988. “The Role of the International Gold Standard in Propagating the Great Depression.” Contemporary Policy Issues 6, no. 2: 67-89.
Hsieh, Chang-Tai, and Christina D. Romer. 2006. “Was the Federal Reserve Constrained by the Gold Standard During the Great Depression? Evidence from the 1932 Open Market Purchase Program.” Journal of Economic History 66, no. 1: 140-76.
Ilzetzki, Ethan, Enrique Mendoza, and Carlos Végh. 2009. “How Big (Small) Are Fiscal Multipliers?” University of Maryland.
James, Harold. 2009. The Creation and Destruction of Value. Harvard University Press.
Kaminsky, Graciela L., Carmen M. Reinhart, and Carlos A. Végh. 2005. “When It Rains, It Pours: Procyclical Capital Flows and Policies.” In NBER Macroeconomics Annual 2004, edited by Mark Gertler and Kenneth Rogoff. MIT Press.
Maddison, Angus. 2004. Historical Statistics for the World Economy: 1–2003 AD. Paris: Organisation for Economic Co-operation and Development. www.ggdc.net/maddison/.
Meltzer, Allan H. 2003. A History of the Federal Reserve, Volume 1: 1913-1951. University of Chicago Press.
Mitchell, Brian R. 2003a. International Historical Statistics: Africa, Asia, and Oceania, 1750–2000. London: Palgrave Macmillan.
———. 2003b. International Historical Statistics, Europe, 1750–2000. London: Palgrave Macmillan.
———. 2003c. International Historical Statistics: The Americas, 1750–2000. London: Palgrave Macmillan.
Mundell, Robert A. 1968. International Economics. New York: Macmillan.
Nurkse, Ragnar. 1944. International Currency Experience: Lessons of the Interwar Period. Geneva: League of Nations.
Officer, Lawrence H. 2001. “Gold Standard.” In EH.Net Encyclopedia, edited by Robert Whaples. eh.net/encyclopedia/article/officer.gold.standard (October 1).
Orphanides, Athanasios. 2004. “Monetary Policy in Deflation: The Liquidity Trap in History and Practice.” North American Journal of Economics and Finance 15, no. 1: 101-24.
Reinhart, Carmen M., and Vincent R. Reinhart. 2008. “Is the US Too Big to Fail? VoxEU, November, at http://www.voxeu.org/index.php?q=node/2568.
Reinhart, Carmen M., and Kenneth S. Rogoff. 2009. This Time Is Different: Eight Centuries of Financial Folly. Princeton University Press.
Reinhart, Carmen M., Kenneth S. Rogoff, and Miguel A. Savastano. 2003. “Debt Intolerance.” BPEA, no. 1: 1-62.
Romer, Christina D. 1992. “What Ended the Great Depression?” Journal of Economic History 52, no. 4: 757-84.
Svensson, Lars E. O. 2003. "Escaping from a Liquidity Trap and Deflation: The Foolproof Way and Others." Journal of Economic Perspectives 17, no. 4: 145-66.