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Monetary policy and business cycles in the interwar years: The Scandinavian experience

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  • Klovland, Jan T.
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    Abstract

    Evidence from newly constructed monthly indices of manufacturing production shows that differences between the Scandinavian countries regarding business cycles in the interwar years were closely related to monetary policy decisions. In the 1920s Sweden made an early return to gold, while Denmark and Norway experienced large fluctuations in nominal and real exchange rates before restoring the gold standard at the prewar parity in 1927 28. The differences in monetary policy were mirrored in the business cycle history; Denmark and Norway being alone in having a particularly severe contraction period in the years 1925 27, referred to as the gold-parity depression. The nominal depreciation of the effective exchange rates following the abandonment of the gold standard in September 1931 led to a significant real depreciation in all three countries. Econometric evidence confirms the view that the decision to leave gold was instrumental in dampening the contractionary business cycle impulses from abroad during the years of the Great Depression.

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    Bibliographic Info

    Article provided by Cambridge University Press in its journal European Review of Economic History.

    Volume (Year): 2 (1998)
    Issue (Month): 03 (December)
    Pages: 309-344

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    Handle: RePEc:cup:ereveh:v:2:y:1998:i:03:p:309-344_00

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    Cited by:
    1. Bertil Holmlund, 2012. "Wage and Employment Determination in Volatile Times: Sweden 1913-1939," CESifo Working Paper Series 3799, CESifo Group Munich.
    2. Gunnar Bårdsen & Jurgen Doornik & Jan Tore Klovland, 2004. "A European-type wage equation from an American-style labor market: Evidence from a panel of Norwegian manufacturing industries in the 1930s," Working Paper 2004/4, Norges Bank.
    3. 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.
    4. Arild Sæther & Ib E. Eriksen, 2014. "Ragnar Frisch and the Postwar Norwegian Economy," Econ Journal Watch, Econ Journal Watch, vol. 11(1), pages 46-80, January.
    5. Klovland, Jan Tore, 2014. "Challenges for the construction of historical price indices: The case of Norway, 1777-1920," Discussion Paper Series in Economics 5/2014, Department of Economics, Norwegian School of Economics.

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