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Role Of The International Gold Standard In Propagating The Great Depression

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  • JAMES D. HAMILTON

Abstract

I do not claim in this paper that the international gold standard was a principal cause of the Great Depression. Instead, I explore the events that allowed the world to slip deeper into depression despite the gold standard. The volatility of international short-term capital flows surely contributed greatly to the Depression. I argue that this volatility was exacerbated-rather than ameliorated-by the international gold standard. The reason is that despite governments' legal assurances that they are committed to a gold standard, speculators never perceive the terms of gold parity as immutable. This statement holds with increasing force when one observes the precarious status of government debts and international finance during the 1920s. This reality renders a gold standard vulnerable to precisely the type of volatility in international capital markets that made the 1931 downturn more severe. Copyright 1988 Western Economic Association International.

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Bibliographic Info

Article provided by Western Economic Association International in its journal Contemporary Economic Policy.

Volume (Year): 6 (1988)
Issue (Month): 2 (04)
Pages: 67-89

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Handle: RePEc:bla:coecpo:v:6:y:1988:i:2:p:67-89

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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Return to the gold standard
    by James Hamilton in Econbrowser on 2012-09-01 09:31:48
  2. Gold conspiracies
    by JP Koning in Moneyness on 2012-09-20 14:02:00
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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Cited by:
  1. Barry Eichengreen., 1990. "Relaxing the External Constraint: Europe in the 1930s," Economics Working Papers 90-147, University of California at Berkeley.
  2. Gabriel Rodriguez & Nicholas Rowe, 1999. "Why U.S. Money does not Cause U.S. Output, but does Cause Hong Kong Output," Carleton Economic Papers 01-07, Carleton University, Department of Economics, revised Nov 2007.
  3. J. Peter Ferderer, 1999. "Credibility of the Interwar Gold Standard, Uncertainty, and the Great Depression," Macroeconomics 9907002, EconWPA.
  4. James D. Hamilton, 2005. "What's Real About the Business Cycle?," NBER Working Papers 11161, National Bureau of Economic Research, Inc.
  5. Mathy, Gabriel P. & Meissner, Christopher M., 2011. "Business cycle co-movement: Evidence from the Great Depression," Journal of Monetary Economics, Elsevier, vol. 58(4), pages 362-372.
  6. Ben Bernanke & Harold James, 1990. "The Gold Standard, Deflation, and Financial Crisis in the Great Depression: An International Comparison," NBER Working Papers 3488, National Bureau of Economic Research, Inc.
  7. Ben S. Bernanke, 1994. "The Macroeconomics of the Great Depression: A Comparative Approach," NBER Working Papers 4814, National Bureau of Economic Research, Inc.
  8. Reinhart, Carmen & Reinhart, Vincent, 2010. "When the North Last Headed South: Revisiting the 1930s," CEPR Discussion Papers 7835, C.E.P.R. Discussion Papers.
  9. Maurice Obstfeld & Alan M. Taylor, 1998. "The Great Depression as a Watershed: International Capital Mobility over the Long Run," NBER Chapters, in: The Defining Moment: The Great Depression and the American Economy in the Twentieth Century, pages 353-402 National Bureau of Economic Research, Inc.
  10. Richardson Gary & Van Horn Patrick, 2011. "Fetters of Debt, Deposit, or Gold during the Great Depression? The International Propagation of the Banking Crisis of 1931," Jahrbuch für Wirtschaftsgeschichte / Economic History Yearbook, De Gruyter, vol. 52(2), pages 29-54, December.
  11. Selgin, George & Lastrapes, William D. & White, Lawrence H., 2012. "Has the Fed been a failure?," Journal of Macroeconomics, Elsevier, vol. 34(3), pages 569-596.

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