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Keynes on the Sequencing of Economic Policy: Recovery and Reform in 1933

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  • Sebastian Edwards

Abstract

On December 31 1933, The New York Times published an open letter from John Maynard Keynes to President Franklin D. Roosevelt. In it Keynes encouraged FDR to expand public works through government borrowing. He also criticized FDR’s exchange rate policy, and argued that there was a need for lower long-term interest rates. But perhaps the most interesting feature of this letter is that Keynes made comments on the sequencing and speed of economic policies. He argued that “recovery” policies should precede “reform” measures. In this paper I analyze this particular aspect of the open letter, and I argue that for Keynes exchange rate stability was a key component of what he considered to be the appropriate order of policy. I also provide a comparison between Keynes’s views on sequencing and those developed in the 1980s and 1990s.

Suggested Citation

  • Sebastian Edwards, 2018. "Keynes on the Sequencing of Economic Policy: Recovery and Reform in 1933," NBER Working Papers 24367, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:24367
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    References listed on IDEAS

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    1. Reinhart, Karmen & Rogoff, Kenneth, 2009. ""This time is different": panorama of eight centuries of financial crises," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 77-114, March.
    2. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "Varieties of Crises and Their Dates," Introductory Chapters,in: This Time Is Different: Eight Centuries of Financial Folly Princeton University Press.
    3. Milton Friedman & Anna J. Schwartz, 1963. "A Monetary History of the United States, 1867–1960," NBER Books, National Bureau of Economic Research, Inc, number frie63-1, March.
    4. Sebastian Edwards, 1990. "The Sequencing of Economic Reform: Analytical Issues and Lessons from Latin American Experiences," The World Economy, Wiley Blackwell, vol. 13(1), pages 1-14, March.
    5. repec:mes:challe:v:26:y:1984:i:6:p:4-8 is not listed on IDEAS
    6. Benn Steil, 2013. "The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the Making of a New World Order," Economics Books, Princeton University Press, edition 1, number 9925.
    7. Sumner, Scott, 1999. "The Role of the Gold Standard in Keynesian Monetary Theory," Economic Inquiry, Western Economic Association International, vol. 37(3), pages 527-540, July.
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    More about this item

    JEL classification:

    • B21 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Microeconomics
    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • B26 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Financial Economics
    • B27 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - International Trade and Finance
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • N12 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - U.S.; Canada: 1913-
    • N22 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: 1913-

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