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Relaxing the External Constraint: Europe in the 1930s

  • Eichengreen, Barry

This paper documents the effects of exchange rates and the external constraint during the interwar years. In the absence of international policy coordination, exchange rate depreciation is shown to have been a necessary precondition for the adoption of policies promoting recovery from the Great Depression. But currency depreciation was not without costs. It increased the variability of nominal exchange rates and rendered them increasingly difficult to predict. Increased variability and uncertainty about nominal exchange rates carried over to short-term changes in real exchange rates as well. Thus, exchange rate variability appears to have introduced additional noise into the operation of the price mechanism.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 452.

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Date of creation: Aug 1990
Date of revision:
Handle: RePEc:cpr:ceprdp:452
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  1. Jeffrey A. Frankel, 1988. "Obstacles to International Macroeconomic Policy Coordination," NBER Working Papers 2505, National Bureau of Economic Research, Inc.
  2. Eichengreen, Barry, 1989. "The Comparative Performance of Fixed and Flexible Exchange Rate Regimes: Interwar Evidence," CEPR Discussion Papers 349, C.E.P.R. Discussion Papers.
  3. Donal J. Donovan, 1981. "Real Responses Associated with Exchange Rate Action in Selected Upper Credit Tranche Stabilization Programs (Résultats liés à une modification du taux de change dans le cadre de programmes de stabil," IMF Staff Papers, Palgrave Macmillan, vol. 28(4), pages 698-727, December.
  4. James D. Hamilton, 1988. "Role Of The International Gold Standard In Propagating The Great Depression," Contemporary Economic Policy, Western Economic Association International, vol. 6(2), pages 67-89, 04.
  5. Eichengreen, Barry, 1989. "The Comparative Performance of Fixed Flexible Exchange Rate Regimes: Interwar Evidence," Department of Economics, Working Paper Series qt2kn4z93w, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  6. Ben S. Bernanke, 1983. "Non-Monetary Effects of the Financial Crisis in the Propagation of the Great Depression," NBER Working Papers 1054, National Bureau of Economic Research, Inc.
  7. Ben Bernanke & Harold James, 1990. "The Gold Standard, Deflation, and Financial Crisis in the Great Depression: An International Comparison," NBER Working Papers 3488, National Bureau of Economic Research, Inc.
  8. Hamilton, James D., 1987. "Monetary factors in the great depression," Journal of Monetary Economics, Elsevier, vol. 19(2), pages 145-169, March.
  9. Kamin, S.B., 1988. "Devaluation, External Balance, And Macroeconomic Performance: A Look At The Numbers," Princeton Studies in International Economics 62, International Economics Section, Departement of Economics Princeton University,.
  10. Peter Temin, 1991. "Lessons from the Great Depression," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262700441, June.
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