Global Great Depression was because of policy reverence to gold standard

With so much focus on Great Depression these days what comes as surprising is that Great Depression was a global event (read Romer’s excellent paper to understand where and when did it start; it impacted India as well). Bernanke in his speech and paper (also this excellent paper)also explains how the Depression became a global event. Much of the blame is on Gold Standard I don’t know whether economics textbooks have been updated as till 1990s we always associated Great Depression with US.

I came across this paperby Barry Eichengreen and Peter Temin who show how Great Depression became global because of the Gold Standard. They explore it from a political angle and show it was the reverence and sticking to the gold standard which led to the crisis becoming a full scale global depression. They also point to their analysis which looks at different policy scenarios  (for instance say if Germany had left Gold Standard earlier) and the economic outcome.

The best part of the paper is – it is quite short and is just about 14 pages. 🙂 It explains quite a lot in 14 pages.

2 Responses to “Global Great Depression was because of policy reverence to gold standard”

  1. UK’s auto bailout package; protectionism rising « Mostly Economics Says:

    […] By Amol Agrawal Great Depression became a global event because of a couple of reasons : one Gold Standard and two rise in protectionism ( I am still reading on the subject and would post as I come across […]

  2. Jesse Says:

    this is not right:
    Romer: “The fundamental cause of the Great Depression in the United States was a decline in spending”

    Romer completely ignores the causes of the boom and only focuses on the crash.

    Economic Depressions: Their Cause and Cure
    http://mises.org/story/3127

    “The bank contraction reverses the economic picture; contraction and bust follow boom. The banks pull in their horns, and businesses suffer as the pressure mounts for debt repayment and contraction. The fall in the supply of bank money, in turn, leads to a general fall in English prices.”

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