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International aspects of the Great Depression and the crisis of 2007: similarities, differences, and lessons

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  • Richard S. Grossman
  • Christopher M. Meissner

Abstract

We focus on two international aspects of the Great Depression--financial crises and international trade--and try to discern lessons for the current economic crisis. Both downturns featured global banking crises which were generated by boom--slump macroeconomic cycles. During both crises, world trade collapsed faster than world incomes and the trade decline was highly synchronized across countries. During the Depression income losses and rises in trade barriers explain trade's collapse. Owing to vertical specialization and more intense trade in durables, today's trade collapse is due to uncertainty and small shocks to trade costs hitting international supply chains. So far, the global economy has avoided the global trade wars and banking collapses of the Depression, perhaps owing to improved policy. Even so, the global economy remains susceptible to large shocks owing to financial innovation and technological change, as recent events illustrate. Copyright 2010, Oxford University Press.

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Bibliographic Info

Article provided by Oxford University Press in its journal Oxford Review of Economic Policy.

Volume (Year): 26 (2010)
Issue (Month): 3 (Autumn)
Pages: 318-338

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Handle: RePEc:oup:oxford:v:26:y:2010:i:3:p:318-338

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Cited by:
  1. Fabio Bagliano & Claudio Morana, 2010. "The Great Recession: US dynamics and spillovers to the world economy," CeRP Working Papers 103, Center for Research on Pensions and Welfare Policies, Turin (Italy).
  2. repec:cge:warwcg:131 is not listed on IDEAS
  3. Crafts, Nicholas; Fearon, Peter, 2010. "Lessons from the 1930s' Great Depression," CAGE Online Working Paper Series 23, Competitive Advantage in the Global Economy (CAGE).
  4. Cristian SPIRIDON, 2012. "World Trade Liberalisation Since The Xixth Century Up To Date," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 9, pages 205-216, June.
  5. repec:cge:warwcg:146 is not listed on IDEAS
  6. Fabio C. Bagliano & Claudio Morana, 2011. "Macro-finance interactions in the US: A global perspective," Working papers 23, Former Department of Economics and Public Finance "G. Prato", University of Torino.
  7. Cristian Spiridon, 2012. "Trade Liberalisation In Europe And The Rest Of The World," CES Working Papers, Centre for European Studies, Alexandru Ioan Cuza University, vol. 4, pages 407-418, September.

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