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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. In the Depression, income losses and rises in trade barriers explain trade's collapse. Due 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 due to improved policy. Even so, the global economy remains susceptible to large shocks due to financial innovation and technological change as recent events illustrate.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16269.

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Date of creation: Aug 2010
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Publication status: published as Richard S. Grossman & Christopher M. Meissner, 2010. "International aspects of the Great Depression and the crisis of 2007: similarities, differences, and lessons," Oxford Review of Economic Policy, Oxford University Press, vol. 26(3), pages 318-338, Autumn.
Handle: RePEc:nbr:nberwo:16269

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Cited by:
  1. repec:cge:warwcg:146 is not listed on IDEAS
  2. repec:cge:warwcg:131 is not listed on IDEAS
  3. Fabio C. Bagliano & Claudio Morana, 2010. "The Great Recession: US dynamics and spillovers to the world economy," ICER Working Papers - Applied Mathematics Series 34-2010, ICER - International Centre for Economic Research.
  4. 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.
  5. 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.
  6. Nicholas Crafts & Peter Fearon, 2010. "Lessons from the 1930s Great Depression," Oxford Review of Economic Policy, Oxford University Press, vol. 26(3), pages 285-317, Autumn.
  7. 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.

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