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Currency Crisis and Unemployment: Sterling in 1931

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  • Barry Eichengreen
  • Olivier Jeanne

Abstract

This paper studies the role of unemployment in sterling's interwar experience. According to most narrative accounts, the proximate cause of the 1931 sterling crisis was a high and rising unemployment rate that placed pressure on British governments to pursue reflationary policies. We present a model which, in the spirit of the second generation' approach to currency crises, highlights the conflict between the objective of low unemployment and defense of the currency and show that it can reproduce the main features of sterling's interwar experience. Econometric evidence lends further support to the view that the proximate cause of the sterling crisis was the dramatic rise in unemployment brought about by external deflationary forces.

Suggested Citation

  • Barry Eichengreen & Olivier Jeanne, 1998. "Currency Crisis and Unemployment: Sterling in 1931," NBER Working Papers 6563, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:6563 Note: IFM
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    Citations

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    Cited by:

    1. Remi Bazillier & Boris Najman, 2017. "Labour and Financial Crises: Is Labour Paying the Price of the Crisis?," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, pages 55-76.
    2. Nicholas Crafts & Peter Fearon, 2010. "Lessons from the 1930s Great Depression," Oxford Review of Economic Policy, Oxford University Press, vol. 26(3), pages 285-317, Autumn.
    3. Eichengreen, Barry, 2003. "Three generations of crises, three generations of crisis models," Journal of International Money and Finance, Elsevier, vol. 22(7), pages 1089-1094, December.

    More about this item

    JEL classification:

    • F2 - International Economics - - International Factor Movements and International Business
    • F3 - International Economics - - International Finance

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