IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/4445.html
   My bibliography  Save this paper

Trade Blocs, Currency Blocs and the Disintegration of World Trade in the 1930s

Author

Listed:
  • Barry Eichengreen
  • Douglas A. Irwin

Abstract

The dramatic implosion and regionalization of international trade during the 1930s has often been blamed on the trade and foreign exchange policies that emerged in the interwar period. We provide new evidence on the impact of trade and currency blocs on trade flows from 1928 1938 that suggests a blanket indictment of interwar trade policies and payments arrangements is not warranted. Discriminatory trade policies and international monetary arrangements had neither a uniformly favorable nor unfavorable implication for world trade; instead the balance of trade-creating and trade-diverting effects depended on the motivations of policymakers and hence on the structure of their policies. We find, for example, that British Commonwealth tariff preferences affected trade more significantly than the sterling-bloc currency area, but both promoted within-group trade without diverting trade away from non-members. Exchange controls and bilateral clearing arrangements enacted by German and Central and Eastern European countries, by contrast, dominated other commercial policies in altering trade patterns, but curtailed trade with non-members with no offsetting trade-creating effects. We also find support for Ragnar Nurkse 's famous hypothesis that exchange-rate volatility in the interwar period diminished trade. Our results speak to the emerging regional trade and currency areas of today, such as the North American Free Trade Agreement and the EC's Single Market and European Monetary System, and suggest that their impact lies not in the regional or global character of the policy initiative, but in the structure and design of the underlying policies.

Suggested Citation

  • Barry Eichengreen & Douglas A. Irwin, 1993. "Trade Blocs, Currency Blocs and the Disintegration of World Trade in the 1930s," NBER Working Papers 4445, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:4445
    Note: ITI
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w4445.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Kitson, M., 1992. "The Move to Autarky: The Political Economy of Nazi Trade Policy," Cambridge Working Papers in Economics 9201, Faculty of Economics, University of Cambridge.
    2. Burda, Michael & Wyplosz, Charles, 2017. "Macroeconomics: a European Text," OUP Catalogue, Oxford University Press, edition 7, number 9780198737513.
    3. Peter Temin, 1991. "Lessons from the Great Depression," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262700441.
    4. Jeffrey A. Frankel & Shang-Jin Wei, 1994. "Yen Bloc or Dollar Bloc? Exchange Rate Policies of the East Asian Economies," NBER Chapters, in: Macroeconomic Linkage: Savings, Exchange Rates, and Capital Flows, pages 295-333, National Bureau of Economic Research, Inc.
    5. Havrylyshyn, Oleh & Pritchett, Lant, 1991. "European trade patterns after the transition," Policy Research Working Paper Series 748, The World Bank.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Frankel, Jeffrey A. & Wei, Shang-Jin, 1995. "European Integration and the Regionalization of World Trade and Currencies: The Economics and the Politics," Center for International and Development Economics Research (CIDER) Working Papers 233413, University of California-Berkeley, Department of Economics.
    2. Ms. Giorgia Albertin, 2008. "Trade Effects of Currency Unions: Do Economic Dissimilarities Matter?," IMF Working Papers 2008/249, International Monetary Fund.
    3. Alberto Alesina & Robert J. Barro & Silvana Tenreyro, 2003. "Optimal Currency Areas," NBER Chapters, in: NBER Macroeconomics Annual 2002, Volume 17, pages 301-356, National Bureau of Economic Research, Inc.
    4. Kool, C. J. M. & Koedijk, K. G., 1997. "Real exchange rates between the wars," Journal of International Money and Finance, Elsevier, vol. 16(2), pages 211-232, April.
    5. Jeffrey A. Frankel and Shang-Jin Wei., 1993. "Emerging Currency Blocs," Center for International and Development Economics Research (CIDER) Working Papers C93-026, University of California at Berkeley.

    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. Eichengreen, Barry & Irwin, Douglas A., 1995. "Trade blocs, currency blocs and the reorientation of world trade in the 1930s," Journal of International Economics, Elsevier, vol. 38(1-2), pages 1-24, February.
    2. Frankel, Jeffrey & Stein, Ernesto & Wei, Shang-jin, 1995. "Trading blocs and the Americas: The natural, the unnatural, and the super-natural," Journal of Development Economics, Elsevier, vol. 47(1), pages 61-95, June.
    3. Polterovich, Victor, 2013. "Реформа Ран: Экспертный Анализ: Часть I. Реформа Ран: Проект Минобрнауки [Reform of the Russian Academy of Sciences: An Expert Analysis: Part I. Reform of the Russian Academy of Sciences: a project," MPRA Paper 49291, University Library of Munich, Germany.
    4. Paolera, Gerardo Della & Taylor, Alan M., 1999. "Economic Recovery from the Argentine Great Depression: Institutions, Expectations, and the Change of Macroeconomic Regime," The Journal of Economic History, Cambridge University Press, vol. 59(3), pages 567-599, September.
    5. Joshua L. Rosenbloom, 1999. "The Challenges of Economic Maturity: New England, 1880 - 1940," NBER Historical Working Papers 0113, National Bureau of Economic Research, Inc.
    6. Ila Patnaik, 2007. "The Indian Currency Regime and its Consequences," Working Papers id:1062, eSocialSciences.
    7. Charles Calomiris, 2000. "Comment on Bordo and Kroszner," Journal of Financial Services Research, Springer;Western Finance Association, vol. 18(2), pages 173-177, December.
    8. Koichi Hamada & Asahi Noguchi, 2005. "The Role of Preconceived Ideas in Macroeconomic Policy: Japan's Experiences in the Two Deflationary Periods," Working Papers 908, Economic Growth Center, Yale University.
    9. Ronald McKinnon & Gunther Schnabl, 2002. "Synchronized Business Cycles in East Asia: Fluctuations in the Yen/Dollar Exchange Rate and China’s Stabilizing Role," Working Papers 02010, Stanford University, Department of Economics.
    10. Bernanke, Ben S, 1995. "The Macroeconomics of the Great Depression: A Comparative Approach," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(1), pages 1-28, February.
    11. Elizabeth Caucutt & Thomas Cooley & Nezih Guner, 2013. "The farm, the city, and the emergence of social security," Journal of Economic Growth, Springer, vol. 18(1), pages 1-32, March.
    12. Ila Patnaik & Ajay Shah, 2009. "The difficulties of the Chinese and Indian exchange rate regimes," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 6(1), pages 157-173, June.
    13. Lawrence J. Christiano & Roberto Motto & Massimo Rostagno, 2003. "The Great Depression and the Friedman-Schwartz hypothesis," Proceedings, Federal Reserve Bank of Cleveland, pages 1119-1215.
    14. Kim, Bong-Han & Kim, Hyeongwoo & Min, Hong-Ghi, 2013. "Reassessing the link between the Japanese yen and emerging Asian currencies," Journal of International Money and Finance, Elsevier, vol. 33(C), pages 306-326.
    15. Koichiro Kamada & Ko Nakayama & Izumi Takagawa, 2002. "Deepening Interdependence in the Asia-Pacific Region: An Empirical Study Using a Macro-Econometric Model," Bank of Japan Working Paper Series Research and Statistics D, Bank of Japan.
    16. Jeffrey A. Frankel & Shang-Jin Wei, 2007. "Assessing China's exchange rate regime [‘Working with the IMF to strengthen exchange rate surveillance’]," Economic Policy, CEPR;CES;MSH, vol. 22(51), pages 576-627.
    17. Florence Marque, 1998. "Dimensions économique, institutionnelle et monétaire de l'intégration régionale en Asie orientale," Revue Tiers Monde, Programme National Persée, vol. 39(156), pages 835-860.
    18. Jeffrey Frankel, 2021. "Systematic Managed Floating," World Scientific Book Chapters, in: Steven J Davis & Edward S Robinson & Bernard Yeung (ed.), THE ASIAN MONETARY POLICY FORUM Insights for Central Banking, chapter 5, pages 160-221, World Scientific Publishing Co. Pte. Ltd..
    19. Schnabel, Isabel, 2002. "The Great Banks` Depression - Deposit Withdrawals in the German Crisis of 1931," Sonderforschungsbereich 504 Publications 03-11, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
    20. Shu, Chang & He, Dong & Cheng, Xiaoqiang, 2015. "One currency, two markets: the renminbi's growing influence in Asia-Pacific," China Economic Review, Elsevier, vol. 33(C), pages 163-178.

    More about this item

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

    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:nbr:nberwo:4445. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    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: (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.