Did France Cause the Great Depression?
The gold standard was a key factor behind the Great Depression, but why did it produce such an intense worldwide deflation and associated economic contraction? While the tightening of U.S. monetary policy in 1928 is often blamed for having initiated the downturn, France increased its share of world gold reserves from 7 percent to 27 percent between 1927 and 1932 and effectively sterilized most of this accumulation. This "gold hoarding" created an artificial shortage of reserves and put other countries under enormous deflationary pressure. Counterfactual simulations indicate that world prices would have increased slightly between 1929 and 1933, instead of declining calamitously, if the historical relationship between world gold reserves and world prices had continued. The results indicate that France was somewhat more to blame than the United States for the worldwide deflation of 1929-33. The deflation could have been avoided if central banks had simply maintained their 1928 cover ratios.
|Date of creation:||Sep 2010|
|Publication status:||published as “ Le France a-t- elle Causé la Grande Dép ression? ” Revue Française d’économ ie 25 (April 2 01 1) : 3-10 .|
|Note:||DAE IFM ME|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Evans, Martin & Wachtel, Paul, 1993.
"Were price changes during the Great Depression anticipated? : Evidence from nominal interest rates,"
Journal of Monetary Economics,
Elsevier, vol. 32(1), pages 3-34, August.
- Martin Evans & Paul Wachtel, 1992. "Were Price Changes during the Great Depression Anticipated? Evidence from Nominal Interest Rates," Working Papers 92-12, New York University, Leonard N. Stern School of Business, Department of Economics.
- Sumner, Scott, 1991. "The Equilibrium Approach to Discretionary Monetary Policy under an International Gold Standard, 1926-1932," The Manchester School of Economic & Social Studies, University of Manchester, vol. 59(4), pages 378-394, December.
- Hugh Rockoff, 1984. "Some Evidence on the Real Price of Gold, Its Costs of Production, and Commodity Prices," NBER Chapters,in: A Retrospective on the Classical Gold Standard, 1821-1931, pages 613-650 National Bureau of Economic Research, Inc.
- Sicsic, Pierre, 1992. "Was the franc poincare deliberately undervalued?," Explorations in Economic History, Elsevier, vol. 29(1), pages 69-92, January.
- Peter Temin, 1991. "Lessons from the Great Depression," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262700441, December.
- Accominotti, Olivier, 2009. "The sterling trap: foreign reserves management at the Bank of France, 1928–1936," European Review of Economic History, Cambridge University Press, vol. 13(03), pages 349-376, December.
- Robert A. Mundell, 2000. "A Reconsideration of the Twentieth Century," American Economic Review, American Economic Association, vol. 90(3), pages 327-340, June.
- Mundell, Robert A., 1999. "A Reconsideration of the Twentieth Century," Nobel Prize in Economics documents 1999-5, Nobel Prize Committee.
- Michael D. Bordo & Anna J. Schwartz, 1984. "A Retrospective on the Classical Gold Standard, 1821-1931," NBER Books, National Bureau of Economic Research, Inc, number bord84-1, Enero-Jun.
- Choudhri, Ehsan U & Kochin, Levis A, 1980. "The Exchange Rate and the International Transmission of Business Cycle Disturbances: Some Evidence from the Great Depression," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 12(4), pages 565-574, November. Full references (including those not matched with items on IDEAS)