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Fiscal policies in Europe and the United States during the Great Depression


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  • Ilja Kristian Kavonius


Abstract: This paper discusses the fiscal policy reactions and economic policies of European countries and the United States during the Great Depression. Economic as well as economic history literature has tended to overlook the fiscal policy aspects of the Great Depression, in particular in relation to European countries. This paper concentrates specifically on this aspect, providing a comprehensive discourse on the background of the crisis and using for analysis a data set compiled from available international sources. On this basis, central government reactions, mainly on the expenditure side, are analysed. Thus, this paper provides new information concerning the economic policies during the Great Depression and helps to understands how the Great Depression developed. The conclusion reached is that fiscal policies between the two World Wars were mainly neo-classical, i.e. expenditure reacted to the development of revenue. In certain European countries, for example the Netherlands and Sweden, some counter-cyclical fiscal policies can be observed. However, as the governments there were smaller and the effect therefore comparably limited, this did not play a key role in the economic recovery. Finally, the paper briefly discusses the similarities and differences between the Great Depression and the current crisis.

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Bibliographic Info

Paper provided by Government Institute for Economic Research Finland (VATT) in its series Working Papers with number 13.

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Date of creation: 11 Feb 2010
Date of revision:
Handle: RePEc:fer:wpaper:13

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Keywords: Great Depression; fiscal policy; counter-cyclical; Keynesian fiscal policy; neo-classical economic policy; economic policy;

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Cited by:
  1. Jarkko Harju, 2012. "Voluntary pension savings and tax incentives: Evidence from Finland," Working Papers, Government Institute for Economic Research Finland (VATT) 33, Government Institute for Economic Research Finland (VATT).
  2. Ossi Korkeamäki & Tomi Kyyrä, 2010. "Institutional rules, labour demand and retirement through disability programme participation," Working Papers, Government Institute for Economic Research Finland (VATT) 16, Government Institute for Economic Research Finland (VATT).
  3. Essi Eerola & Teemu Lyytikäinen, 2012. "On the role of public price information in housing markets," Working Papers, Government Institute for Economic Research Finland (VATT) 30, Government Institute for Economic Research Finland (VATT).


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