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Crisis and Growth in the Advanced Economies: What We Know, What We Do not, and What We Can Learn from the 1930s

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  • Barry Eichengreen

    ()
    (University of California, Evans Hall 508, CA 94708 Berkeley, USA.)

Abstract

This paper addresses the question of whether the medium- and long-term growth potential of the advanced economies has been impaired by the global financial crisis. It evidence from the Great Despression of the 1930s to illuminate the prospects, concluding the following. First, the impact of weak bank balance sheets and heightened risk aversion made it harder for small firms. in particular, to fund investment projects. Second, there is little evidence that increased public debt or policy uncertainity had major effects in depressing investment. Third, structural unemployment dissolved quickly in the face of increased demand. Fourth and finally, the crisis was also an opportunity as firms used the downtime created by the Depression to reorganize and modernize their operations.

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Bibliographic Info

Article provided by Palgrave Macmillan in its journal Comparative Economic Studies.

Volume (Year): 53 (2011)
Issue (Month): 3 (September)
Pages: 383-406

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Handle: RePEc:pal:compes:v:53:y:2011:i:3:p:383-406

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  1. Harold L. Cole & Lee E. Ohanian, 2004. "New Deal Policies and the Persistence of the Great Depression: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, vol. 112(4), pages 779-816, August.
  2. Cavallo, Alberto F. & Cavallo, Eduardo A., 2010. "Are crises good for long-term growth? The role of political institutions," Journal of Macroeconomics, Elsevier, vol. 32(3), pages 838-857, September.
  3. Olivier Blanchard & Justin Wolfers, 1999. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," NBER Working Papers 7282, National Bureau of Economic Research, Inc.
  4. Olivier J. Blanchard & Lawrence H. Summers, 1986. "Hysteresis and the European Unemployment Problem," NBER Working Papers 1950, National Bureau of Economic Research, Inc.
  5. Schiffman, Daniel A., 2003. "Shattered Rails, Ruined Credit: Financial Fragility and Railroad Operations in the Great Depression," The Journal of Economic History, Cambridge University Press, vol. 63(03), pages 802-825, September.
  6. Mayer, Thomas & Chatterji, Monojit, 1985. "Political Shocks and Investment: Some Evidence from the 1930s," The Journal of Economic History, Cambridge University Press, vol. 45(04), pages 913-924, December.
  7. Heim, Carol E., 1983. "Industrial Organization and Regional Development in Interwar Britain," The Journal of Economic History, Cambridge University Press, vol. 43(04), pages 931-952, December.
  8. Eduardo A. Cavallo & Alberto Cavallo, 2008. "¿Son Buenas las Crisis para el Crecimiento a Largo Plazo? El Papel de las Instituciones Políticas," Research Department Publications 4590, Inter-American Development Bank, Research Department.
  9. Broadberry, Stephen N., 1998. "How Did the United States and Germany Overtake Britian? A Sectoral Analysis of Comparative Productivity Levels, 1870–1990," The Journal of Economic History, Cambridge University Press, vol. 58(02), pages 375-407, June.
  10. Michael D. Bordo & John S. Landon-Lane, 2010. "The Global Financial Crisis of 2007-08: Is it Unprecedented?," NBER Working Papers 16589, National Bureau of Economic Research, Inc.
  11. Milton Friedman & Anna J. Schwartz, 1963. "A Monetary History of the United States, 1867-1960," NBER Books, National Bureau of Economic Research, Inc, number frie63-1, octubre-d.
  12. Charles W. Calomiris & Berry Wilson, 2004. "Bank Capital and Portfolio Management: The 1930s "Capital Crunch" and the Scramble to Shed Risk," The Journal of Business, University of Chicago Press, vol. 77(3), pages 421-456, July.
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Cited by:
  1. Richard Pomfret, 2012. "The Post-2007 Crises and Europe's Place in the Global Economy," CASE Network Studies and Analyses 439, CASE-Center for Social and Economic Research.
  2. Richard Pomfret, 2011. "Global Crises, Fiscal Imbalances and Global Instability: Interests and Reactions of Asian Economies," School of Economics Working Papers 2011-33, University of Adelaide, School of Economics.
  3. Nicholas Crafts, 2013. "Long-Term Growth in Europe: What Difference does the Crisis Make?," National Institute Economic Review, National Institute of Economic and Social Research, vol. 224(1), pages R14-R28, May.

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