Working Paper: CEPR ID: DP8057
Authors: Nicholas Crafts; Peter Fearon
Abstract: This paper provides a survey of the Great Depression comprising both a narrative account and adetailed review of the empirical evidence focusing especially on the experience of the United States. We examine the reasons for and the flawed resolution of the American banking crisis as well as the conduct of fiscal and monetary policy. we also consider the pivotal role of the gold standard in the international transmission of the slump and leaving gold as a route to recovery. Policy lessons from the Great Depression for today are discussed as are some implications for macroeconomics
Keywords: banking crisis; fiscal multiplier; gold standard; great depression
JEL Codes: E65; N12; N14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Federal Reserve's failure to act as a vigorous lender of last resort (E58) | severity of the downturn (F44) |
| bank failures (G21) | loss of financial intermediation services (G20) |
| loss of financial intermediation services (G20) | credit crunch (E51) |
| credit crunch (E51) | declines in real output (E31) |
| adherence to the gold standard (E42) | deflationary measures (E31) |
| deflationary measures (E31) | deepened recession (F44) |
| deflationary measures (E31) | prolonged unemployment (J64) |
| gold standard (E42) | international transmission of the depression (F44) |
| aggressive fiscal and monetary policies during 2008-2009 crisis (E63) | prevented a repeat of the Great Depression (E65) |