Working Paper: CEPR ID: DP7957
Authors: Nikolaus Wolf
Abstract: The purpose of this paper is to survey and re-interpret the extensive literature that tried to explain both the depth of the great depression in Europe and the delay of recovery as a failure to coordinate economic policies. Europe could not exploit her vast economic potential after 1918, because the war had not yet come to an end ? indeed it did not end before 1945. Both, domestic and international institutions suffered from a lack of reciprocal trust and commitment, which can be clearly illustrated in the realm of monetary policy, but affected many other areas of policymaking, such as energy or migration policies. These institutions in turn affected expectations and thereby the extent to which for example expansionary policies could be effective.
Keywords: Europe; Great Depression
JEL Codes: E50; F50; N14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| failure to coordinate economic policies across Europe (N14) | inability to exploit economic potential post-1918 (N14) |
| instability of domestic and international institutions (O17) | failure to coordinate economic policies across Europe (N14) |
| failure to coordinate economic policies across Europe (N14) | ineffective monetary policy (E65) |
| ineffective monetary policy (E65) | affected expectations about effectiveness of expansionary policies (E65) |
| fragility of political institutions and unresolved war debts (N40) | detrimental environment for economic recovery (F69) |
| countries adhering to the gold standard longer (N13) | deeper economic crises (G01) |
| rearmament programs during late 1930s (H56) | economic recovery (E65) |