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Export-Led Decay: The Trade Channel in the Gold Standard Era

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  • Bernardo Candia
  • Mathieu Pedemonte

Abstract

Flexible exchange rates can facilitate price adjustments that buffer macroeconomic shocks. We test this hypothesis using adjustments to the gold standard during the Great Depression. Using novel monthly data on city-level economic activity, sectoral employment, and export data, we show that American exporting cities were significantly affected by changes in bilateral exchange rates. We calibrate a general equilibrium model to obtain aggregate effects from cross-sectional estimates. We show that the trade channel deepened the Great Depression and was a key driver of the economic recovery in 1933.

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  • Bernardo Candia & Mathieu Pedemonte, 2025. "Export-Led Decay: The Trade Channel in the Gold Standard Era," Journal of the European Economic Association, European Economic Association, vol. 23(3), pages 1173-1201.
    • Handle: RePEc:oup:jeurec:v:23:y:2025:i:3:p:1173-1201.
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    File URL: http://hdl.handle.net/10.1093/jeea/jvae051
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