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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. Sebastiano Nerozzi, 2011. "From the Great Depression to Bretton Woods: Jacob Viner and international monetary stabilization (1930-1945)," The European Journal of the History of Economic Thought, Taylor & Francis Journals, Taylor & Francis Journals, vol. 18(1), pages 55-84.
  2. Ben S. Bernanke, 1994. "The Macroeconomics of the Great Depression: A Comparative Approach," NBER Working Papers 4814, National Bureau of Economic Research, Inc.
  3. Selgin, George & Lastrapes, William D. & White, Lawrence H., 2012. "Has the Fed been a failure?," Journal of Macroeconomics, Elsevier, Elsevier, vol. 34(3), pages 569-596.
  4. Eichengreen, Barry, 1990. "Relaxing the External Constraint: europe in the 1930s," Department of Economics, Working Paper Series, Department of Economics, Institute for Business and Economic Research, UC Berkeley qt45x5d198, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  5. 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.
  6. James D. Hamilton, 2005. "What's real about the business cycle?," Review, Federal Reserve Bank of St. Louis, Federal Reserve Bank of St. Louis, issue Jul, pages 435-452.
  7. 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, De Gruyter, vol. 52(2), pages 29-54, December.
  8. Reinhart, Carmen & Reinhart, Vincent, 2010. "When the North Last Headed South: Revisiting the 1930s," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7835, C.E.P.R. Discussion Papers.
  9. J. Peter Ferderer, 1999. "Credibility of the Interwar Gold Standard, Uncertainty, and the Great Depression," Macroeconomics, EconWPA 9907002, EconWPA.
  10. Mathy, Gabriel P. & Meissner, Christopher M., 2011. "Business cycle co-movement: Evidence from the Great Depression," Journal of Monetary Economics, Elsevier, Elsevier, vol. 58(4), pages 362-372.
  11. Rodriguez, Gabriel & Rowe, Nicholas, 2007. "Why U.S. money does not cause U.S. output, but does cause Hong Kong output," Journal of International Money and Finance, Elsevier, Elsevier, vol. 26(7), pages 1174-1186, November.
  12. Maurice Obstfeld & Alan M. Taylor, 1997. "The Great Depression as a Watershed: International Capital Mobility over the Long Run," NBER Working Papers 5960, National Bureau of Economic Research, Inc.

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