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International Aspects of the Great Depression and the Crisis of 2007: Similarities, Differences, and Lessons

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  • Richard S. Grossman

    (Department of Economics, Wesleyan University)

  • Christopher M. Meissner

    (Department of Economics, University of California, Davis, and National Bureau of Economic Research)

Abstract

We focus on two international aspects of the Great Depression--financial crises and international trade—and try to discern lessons for the current economic crisis. Both downturns featured global banking crises which were generated by boom-slump macroeconomic cycles. During both crises, world trade collapsed faster than world incomes and the trade decline was highly synchronized across countries. In the Depression, income losses and rises in trade barriers explain trade’s collapse. Due to vertical specialization and more intense trade in durables today’s trade collapse is due to uncertainty and small shocks to trade costs hitting international supply chains. So far, the global economy has avoided the global trade wars and banking collapses of the Depression perhaps due to improved policy. Even so, the global economy remains susceptible to large shocks due to financial innovation and technological change as recent events illustrate.

Suggested Citation

  • Richard S. Grossman & Christopher M. Meissner, 2010. "International Aspects of the Great Depression and the Crisis of 2007: Similarities, Differences, and Lessons," Wesleyan Economics Working Papers 2010-002, Wesleyan University, Department of Economics, revised Aug 2010.
  • Handle: RePEc:wes:weswpa:2010-002
    Note: Earlier version available at http://www2.warwick.ac.uk/fac/soc/economics/research/centres/cage/events/conferences/lessons/papers/grossman-meissner-040910.pdf
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    More about this item

    Keywords

    Great Depression; Crisis of 2007;

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • F15 - International Economics - - Trade - - - Economic Integration
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative
    • N70 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - General, International, or Comparative

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