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The limits of internal devaluation: Switzerland during the great depression

Author

Listed:
  • Peter Rosenkranz

    (Asian Development Bank)

  • Tobias Straumann

    (University of Zurich)

  • Ulrich Woitek

    (University of Zurich)

Abstract

During the Great Depression, countries endowed with abundant gold reserves were not able to leave the gold standard and devalue their currencies until the mid-1930s. Instead, they were forced to go down the road of internal devaluation. We analyze the policies of the Swiss authorities by estimating a New Keynesian small open economy model. Our results show that the long adherence to the gold standard and the failure of internal devaluation imposed considerable costs on the Swiss economy. Moreover, counterfactual exercises suggest that a timely devaluation would have led to an early recovery from the Great Depression.

Suggested Citation

  • Peter Rosenkranz & Tobias Straumann & Ulrich Woitek, 2022. "The limits of internal devaluation: Switzerland during the great depression," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 158(1), pages 1-17, December.
    • Handle: RePEc:spr:sjecst:v:158:y:2022:i:1:d:10.1186_s41937-022-00100-9
    DOI: 10.1186/s41937-022-00100-9
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    References listed on IDEAS

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    More about this item

    Keywords

    Great Depression; Switzerland; New Keynesian business cycle model;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-

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