IDEAS home Printed from https://ideas.repec.org/a/spr/cliomt/v18y2024i1d10.1007_s11698-022-00262-9.html
   My bibliography  Save this article

Competitive devaluations in the 1930s: myth or reality?

Author

Listed:
  • Jonas Ljungberg

    (Lund University)

Abstract

This article is the first examination of competitive devaluation in the 1930s using data on exchange rates. It analyses the impact of currency changes on foreign trade flows of fourteen industrialized countries 1929–1939. It reviews the development of nominal and real effective exchange rates together with trade and economic growth and conducts a disaggregated analysis of trade and bilateral exchange rates with trade partners. Tests show that the beggar-thy-neighbour effects of exchange rate adjustments were few and temporary. Moreover, it is argued that currency depreciations were expansionary not only for countries that devalued but for the international economy as a whole. This argument draws on Ragnar Nurkse (Nurkse, International currency experience, Lessons of the Inter-War Period. League of Nations, 1944) who undeservingly has been associated with the notion of “competitive devaluation”. Nurkse showed that currency depreciations increased global monetary reserves, an observation that has gone remarkably overlooked in the literature.

Suggested Citation

  • Jonas Ljungberg, 2024. "Competitive devaluations in the 1930s: myth or reality?," Cliometrica, Springer;Cliometric Society (Association Francaise de Cliométrie), vol. 18(1), pages 151-189, January.
    • Handle: RePEc:spr:cliomt:v:18:y:2024:i:1:d:10.1007_s11698-022-00262-9
    DOI: 10.1007/s11698-022-00262-9
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s11698-022-00262-9
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s11698-022-00262-9?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Eichengreen, Barry & Irwin, Douglas A., 2010. "The Slide to Protectionism in the Great Depression: Who Succumbed and Why?," The Journal of Economic History, Cambridge University Press, vol. 70(4), pages 871-897, December.
    2. Pinelopi Koujianou Goldberg & Michael M. Knetter, 1997. "Goods Prices and Exchange Rates: What Have We Learned?," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1243-1272, September.
    3. Mohsen Bahmani & Hanafiah Harvey & Scott W. Hegerty, 2013. "Empirical tests of the Marshall‐Lerner condition: a literature review," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 40(3), pages 411-443, July.
    4. Eichengreen, Barry & Sachs, Jeffrey, 1985. "Exchange Rates and Economic Recovery in the 1930s," The Journal of Economic History, Cambridge University Press, vol. 45(4), pages 925-946, December.
    5. Eichengreen, Barry & Sachs, Jeffrey, 1986. "Competitive devaluation and the Great Depression : A theoretical reassessment," Economics Letters, Elsevier, vol. 22(1), pages 67-71.
    6. Paul R. Bergin & Giancarlo Corsetti, 2020. "Beyond Competitive Devaluations: The Monetary Dimensions of Comparative Advantage," American Economic Journal: Macroeconomics, American Economic Association, vol. 12(4), pages 246-286, October.
    7. Mohsen Bahmani‐Oskooee & Scott W. Hegerty, 2010. "The J‐ and S‐curves: a survey of the recent literature," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 37(6), pages 580-596, November.
    8. Romer, Christina D., 1992. "What Ended the Great Depression?," The Journal of Economic History, Cambridge University Press, vol. 52(4), pages 757-784, December.
    9. Alan de Bromhead & Alan Fernihough & Markus Lampe & Kevin Hjortshøj O'Rourke, 2019. "When Britain Turned Inward: The Impact of Interwar British Protection," American Economic Review, American Economic Association, vol. 109(2), pages 325-352, February.
    10. Robert E. Lipsey, 1963. "Price and Quantity Trends in the Foreign Trade of the United States," NBER Books, National Bureau of Economic Research, Inc, number lips63-1, May.
    11. McDonald, Judith A. & O'Brien, Anthony Patrick & Callahan, Colleen M., 1997. "Trade Wars: Canada's Reaction to the Smoot-Hawley Tariff," The Journal of Economic History, Cambridge University Press, vol. 57(4), pages 802-826, December.
    12. Robert E. Lipsey, 1963. "Introduction to "Price and Quantity Trends in the Foreign Trade of the United States"," NBER Chapters, in: Price and Quantity Trends in the Foreign Trade of the United States, pages 3-7, National Bureau of Economic Research, Inc.
    13. Michael A. Clemens & Jeffrey G. Williamson, 2004. "Why did the Tariff--Growth Correlation Change after 1950?," Journal of Economic Growth, Springer, vol. 9(1), pages 5-46, March.
    14. Mohsen Bahmani‐Oskooee & Scott W. Hegerty, 2010. "The J‐ and S‐curves: a survey of the recent literature," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 37(6), pages 580-596, November.
    15. Eichengreen, Barry, 1996. "Golden Fetters: The Gold Standard and the Great Depression, 1919-1939," OUP Catalogue, Oxford University Press, number 9780195101133, Decembrie.
    16. David L. Glickman, 1947. "The British Imperial Preference System," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 61(3), pages 439-470.
    17. Mohsen Bahmani‐Oskooee & Scott W. Hegerty, 2007. "Exchange rate volatility and trade flows: a review article," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 34(3), pages 211-255, August.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Javed Iqbal & Sitara Jabeen & Misbah Nosheen & Mark Wohar, 2024. "The Asymmetric Effects of Exchange Rate Volatility on Pakistan–Japan Commodity Trade: Evidence from Non-linear ARDL Approach," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 31(3), pages 657-732, September.
    2. Charles W. Calomiris & Christopher Hanes, 1994. "Historical Macroeconomics and American Macroeconomic History," NBER Working Papers 4935, National Bureau of Economic Research, Inc.
    3. Nicholas Crafts & Peter Fearon, 2010. "Lessons from the 1930s Great Depression," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 26(3), pages 285-317, Autumn.
    4. Barry Eichengreen, 2021. "Gold and South Africa’s Great Depression," Economic History of Developing Regions, Taylor & Francis Journals, vol. 36(2), pages 175-193, May.
    5. Martin Ellison & Sang Seok Lee & Kevin Hjortshøj O'Rourke, 2024. "The Ends of 27 Big Depressions," American Economic Review, American Economic Association, vol. 114(1), pages 134-168, January.
    6. Eichengreen, Barry, 2013. "Currency war or international policy coordination?," Journal of Policy Modeling, Elsevier, vol. 35(3), pages 425-433.
    7. Mitchener, Kris James & Wandschneider, Kirsten, 2015. "Capital controls and recovery from the financial crisis of the 1930s," Journal of International Economics, Elsevier, vol. 95(2), pages 188-201.
    8. Alan de Bromhead & Alan Fernihough & Markus Lampe & Kevin Hjortshøj O'Rourke, 2021. "Four great Asian trade collapses," Australian Economic History Review, Economic History Society of Australia and New Zealand, vol. 61(2), pages 159-185, July.
    9. Eichengreen, Barry & Irwin, Douglas A., 2010. "The Slide to Protectionism in the Great Depression: Who Succumbed and Why?," The Journal of Economic History, Cambridge University Press, vol. 70(4), pages 871-897, December.
    10. Ljungberg, Jonas, 2020. "The Myth of Competitive Devaluations in the 1930s," Lund Papers in Economic History 211, Lund University, Department of Economic History.
    11. Muhammad Omer & Junaid Kamal & Jakob Haan, 2023. "Does an exchange rate depreciation improve the trade balance of Pakistan?," International Journal of Economic Policy Studies, Springer, vol. 17(1), pages 163-185, February.
    12. Edwards, Sebastian, 2020. "Change of monetary regime, contracts, and prices: Lessons from the great depression, 1932–1935," Journal of International Money and Finance, Elsevier, vol. 108(C).
    13. 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 and Oxford Review of Economic Policy Limited, vol. 26(3), pages 318-338, Autumn.
    14. Miguel Almunia & Agustín Bénétrix & Barry Eichengreen & Kevin H. O’Rourke & Gisela Rua, 2010. "From Great Depression to Great Credit Crisis: similarities, differences and lessons [Germany: Guns, butter, and economic miracles]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 25(62), pages 219-265.
    15. Mathy, Gabriel P. & Meissner, Christopher M., 2011. "Business cycle co-movement: Evidence from the Great Depression," Journal of Monetary Economics, Elsevier, vol. 58(4), pages 362-372.
    16. Gabriel P. Mathy, 2020. "How much did uncertainty shocks matter in the Great Depression?," Cliometrica, Springer;Cliometric Society (Association Francaise de Cliométrie), vol. 14(2), pages 283-323, May.
    17. Martin Ellison & Sang Seok Lee & Kevin Hjortshøj O’Rourke, 2020. "The Ends of 30 Big Depressions," Economics Series Working Papers 896, University of Oxford, Department of Economics.
    18. Mitchener, Kris James & Wandschneider, Kirsten, 2013. "Capital Controls and Recovery from the Financial Crisis of the 1930s," CAGE Online Working Paper Series 132, Competitive Advantage in the Global Economy (CAGE).
    19. Binder, Carola Conces, 2016. "Estimation of historical inflation expectations," Explorations in Economic History, Elsevier, vol. 61(C), pages 1-31.
    20. Nicholas Crafts, 2014. "What Does the 1930s' Experience Tell Us about the Future of the Eurozone?," Journal of Common Market Studies, Wiley Blackwell, vol. 52(4), pages 713-727, July.

    More about this item

    Keywords

    Interwar; Europe; Exchange rates; Trade; Depression;
    All these keywords.

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • N1 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations
    • N12 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - U.S.; Canada: 1913-
    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:cliomt:v:18:y:2024:i:1:d:10.1007_s11698-022-00262-9. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.