The Ends of 30 Big Depressions
110 Pages Posted: 28 Jul 2020 Last revised: 2 Nov 2020
There are 2 versions of this paper
The Ends of 27 Big Depressions
Date Written: July 2020
Abstract
How did countries recover from the Great Depression? In this paper we explore the argument that leaving the gold standard helped by boosting inflationary expectations and lowering real interest rates. We do so for a sample of 30 countries, using modern nowcasting methods and a new dataset containing more than 230,000 monthly and quarterly observations for over 1, 500 variables. In those cases where the departure from gold happened on clearly defined dates, it seems clear that inflationary expectations rose in the wake of departure. IV regressions and synthetic matching techniques suggest that the relationship is causal, a finding that is supported by DSGE model-based counterfactuals as well.
Keywords: gold standard, Great Depression, inflationary expectations
JEL Classification: F33, N10
Suggested Citation: Suggested Citation