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The Gold Standard and the international dimension of the Great Depression

Published online by Cambridge University Press:  07 November 2023

Luca Pensieroso  and
Romain Restout
Luca Pensieroso
Affiliation:
IRES/LIDAM, UCLouvain, Louvain-la-Neuve, Belgium
Romain Restout*
Affiliation:
Université de Lorraine and BETA, Nancy, France
*
Corresponding author: Romain Restout; Email: romain.restout@univ-lorraine.fr
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Abstract

Was the Gold Standard a major determinant of the onset and protracted character of the Great Depression of the 1930s in the USA and worldwide? In this paper, we model the “Gold Standard hypothesis” in an open-economy, dynamic general equilibrium framework. We show that encompassing the international and monetary dimensions of the Great Depression is important to understand the turmoil of the 1930s. In particular, the Gold Standard turns out to be a strong transmission mechanism of monetary shocks from the USA to the rest of the world. Our results also suggest that the waves of successive nominal exchange rate devaluations coupled with the monetary policy implemented in the USA might not have enhanced the recovery.

Keywords

Great DepressionGold Standardopen macroeconomicsdynamic general equilibrium
Type
Articles
Information
Macroeconomic Dynamics , First View , pp. 1 - 25
Copyright
© The Author(s), 2023. Published by Cambridge University Press

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Footnotes

†

Paper presented at the EEA 2017 meeting in Lisbon, at the CEF 2017 conference in New York, at the ASSET 2016 conference in Thessaloniki, at the Workshop in Macroeconomics in Ghent in 2017 and at the 2015 Macro-Dynamics Workshop in Bilbao. We thank participants at these meetings, as well as participants in seminars at the Universities of Louvain and Strasbourg for their feedback. Yao Chen, Eric Monnet, Charlotte de Montpellier, Robert Kollmann, Giulio Nicoletti, Henri Sneessens and Felix Ward made interesting remarks on an earlier version. The usual disclaimers apply.

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