Working Paper: NBER ID: w2198
Authors: Barry Eichengreen
Abstract: A number of explanations for the severity of the Great Depression focus on the malfunctioning of the international monetary system. One such explanation emphasizes the deflationary monetary consequences of the liquidation of foreign-exchange reserves following competitive devaluations by Great Britain and her trading partners. Another emphasizes instead the international monetary policies of the Federal Reserve and the Rank of France. This paper analyzes both the exceptional behavior of the U.S. and France and the shift out of foreign exchange after 1930. While both Franco-American gold policies and systemic weaknesses of the international monetary system emerge as important factors in explaining the international distribution of reserves, the first of these factors turns out to play the more important role in the monetary stringency associated with the Great Depression.
Keywords: Great Depression; Gold-Exchange Standard; International Monetary System
JEL Codes: E32; F33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| U.S. and French gold policies (N11) | monetary stringency associated with the Great Depression (E44) |
| concentration of gold reserves (L72) | monetary deflation (E31) |
| liquidation of foreign exchange reserves (F31) | reduced money supplies (E51) |
| shift out of foreign exchange (F31) | instability of the gold-exchange standard (F33) |
| weakening of gold-exchange standard (F33) | devaluation pressures on currencies (F31) |