The Ends of 27 Big Depressions
American Economic Review
vol. 114,
no. 1, January 2024
(pp. 134-68)
Abstract
How did countries recover from the Great Depression? In this paper, we explore the argument that leaving the gold standard helped by boosting inflationary expectations, lowering real interest rates, and stimulating interest-sensitive expenditures. We do so for a sample of 27 countries, using modern nowcasting methods and a new dataset containing more than 230,000 monthly and quarterly observations for over 1,500 variables. In those cases where the departure from gold happened on well-defined dates, inflationary expectations clearly rose in the wake of departure. Instrumental variable, difference-in-difference, and synthetic matching techniques suggest that the relationship is causal.Citation
Ellison, Martin, Sang Seok Lee, and Kevin Hjortshøj O'Rourke. 2024. "The Ends of 27 Big Depressions." American Economic Review, 114 (1): 134-68. DOI: 10.1257/aer.20221479Additional Materials
JEL Classification
- E31 Price Level; Inflation; Deflation
- E32 Business Fluctuations; Cycles
- E42 Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems
- E43 Interest Rates: Determination, Term Structure, and Effects
- F30 International Finance: General
- N10 Economic History: Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations: General, International, or Comparative
- N20 Economic History: Financial Markets and Institutions: General, International, or Comparative