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Swiss Exchange Rate Policy in the 1930s. Was the Delay in Devaluation Too High a Price to Pay for Conservatism?

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  • Michael Bordo

    ()

  • Thomas Helbling

    ()

  • Harold James

    ()

Abstract

In this paper we examine the experience of Switzerland’s devaluation in 1936. We ask the following questions: what were the issues at stake in the political debate? What was the cost to Switzerland of the delay in the franc devaluation? What would have been the costs and benefits of an earlier exchange rate policy? To answer these questions we construct a simple open economy macro model of the interwar Swiss economy. We then posit counterfactual scenarios of alternative exchange rate pegs in 1931 and 1933. Our simulations clearly show a significant and large increase in real economic activity. Copyright Springer Science+Business Media, LLC 2007

Suggested Citation

  • Michael Bordo & Thomas Helbling & Harold James, 2007. "Swiss Exchange Rate Policy in the 1930s. Was the Delay in Devaluation Too High a Price to Pay for Conservatism?," Open Economies Review, Springer, vol. 18(1), pages 1-25, February.
  • Handle: RePEc:kap:openec:v:18:y:2007:i:1:p:1-25 DOI: 10.1007/s11079-007-9000-5
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    References listed on IDEAS

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    1. McCallum, Bennett T & Nelson, Edward, 2000. "Monetary Policy for an Open Economy: An Alternative Framework with Optimizing Agents and Sticky Prices," Oxford Review of Economic Policy, Oxford University Press, vol. 16(4), pages 74-91, Winter.
    2. Peter Temin, 1991. "Lessons from the Great Depression," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262700441, January.
    3. Ben Bemanke & Harold James, 1991. "The Gold Standard, Deflation, and Financial Crisis in the Great Depression: An International Comparison," NBER Chapters,in: Financial Markets and Financial Crises, pages 33-68 National Bureau of Economic Research, Inc.
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    Cited by:

    1. Siklos, Pierre L., 2008. "The Fed's reaction to the stock market during the great depression: Fact or artefact?," Explorations in Economic History, Elsevier, vol. 45(2), pages 164-184, April.
    2. Paul Hallwood & Ronald MacDonald & Ian Marsh, 2011. "Remilitarization and the End of the Gold Bloc in 1936," De Economist, Springer, pages 305-321.
    3. Rockoff, Hugh & White, Eugene N., 2012. "Monetary Regimes and Policy on a Global Scale: The Oeuvre of Michael D. Bordo," MPRA Paper 49672, University Library of Munich, Germany, revised May 2013.
    4. repec:usg:auswrt:2017:68:01:101-108 is not listed on IDEAS
    5. Jonathan Payne & Lawrence Uren, 2014. "Economic Policy and the Great Depression in a Small Open Economy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 46(2-3), pages 347-370, March.
    6. Peter Rosenkranz & Tobias Straumann & Ulrich Woitek, 2014. "A small open economy in the Great Depression: the case of Switzerland," ECON - Working Papers 164, Department of Economics - University of Zurich.
    7. Michael D. Bordo & Pierre L. Siklos, 2017. "Central Banks: Evolution and Innovation in Historical Perspective," NBER Working Papers 23847, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    Switzerland; Exchange rate policy; Devaluation; Gold bloc; Great depression; N14; N24;

    JEL classification:

    • N1 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations
    • N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913

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