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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 C. Bagliano & Claudio Morana, 2012. "Macro-Finance Interactions in the US: A Global Perspective," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum.
  2. Crafts, Nicholas; Fearon, Peter, 2010. "Lessons from the 1930s' Great Depression," CAGE Online Working Paper Series 23, Competitive Advantage in the Global Economy (CAGE).
  3. 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).

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