When the North Last Headed South: Revisiting the 1930s
AbstractThe 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 1930sâmany countries sharply increased government spendingâbut prone to reversals that may have undermined confidence. Countries that were more consistent in keeping spending high tended to recover more quickly.
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Bibliographic InfoArticle provided by Economic Studies Program, The Brookings Institution in its journal Brookings Papers on Economic Activity.
Volume (Year): 40 (2009)
Issue (Month): 2 (Fall) ()
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macroeconomics; recession; financial crisis; historical economics;
Other versions of this item:
- Reinhart, Carmen & Reinhart, Vincent, 2009. "When the North Last Headed South: Revisiting the 1930s," MPRA Paper 22612, University Library of Munich, Germany.
- Reinhart, Carmen & Reinhart, Vincent, 2010. "When the North Last Headed South: Revisiting the 1930s," CEPR Discussion Papers 7835, C.E.P.R. Discussion Papers.
- F3 - International Economics - - International Finance
- H6 - Public Economics - - National Budget, Deficit, and Debt
- N1 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations
- N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative
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