Hostname: page-component-586b7cd67f-l7hp2 Total loading time: 0 Render date: 2024-11-23T02:16:44.789Z Has data issue: false hasContentIssue false
  • English
  • Français

Still tied by golden fetters: the global response to the US recession of 1937–19381

Published online by Cambridge University Press:  06 March 2012

Scott Urban  and
Tobias Straumann
Scott Urban
Affiliation:
University of Oxford, [email protected]
Tobias Straumann
Affiliation:
University of Zurich, [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

The US recession of 1937–8 is one of the deepest on record. Yet it did not produce a global depression – quite unlike 1930. According to the standard view, this reflected an unfettering of central banking after the collapse of the international gold standard circa 1931. We challenge this view. While Germany and a couple of Central and Eastern European countries were sheltered by binding exchange controls, most countries were still constrained by their golden fetters, as our new exchange rate regime classification suggests. The underlying policy regime was surprisingly similar to that of the 1929–30 downturn. What mattered was a quick reversal in US policy in 1938 and, for many countries, a more plentiful stock of international reserves.

Keywords

interventionreservesfixed exchange ratesgold standardsterling area

JEL classification

N14: Europe: 1913– N10: General, International, or Comparative N12: U.S. • Canada: 1913–
Type
Articles
Information
Financial History Review , Volume 19 , Issue 1 , April 2012 , pp. 21 - 48
Copyright
Copyright © European Association for Banking and Financial History e.V. 2012

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

References

BANK FOR INTERNATIONAL SETTLEMENTS (1937). Report 1936–37. Basle: Bank for International Settlements.Google Scholar
BANK FOR INTERNATIONAL SETTLEMENTS (1938). Report 1937–38. Basle: Bank for International Settlements.Google Scholar
BANK FOR INTERNATIONAL SETTLEMENTS (1938). Report 1938–39. Basle: Bank for International Settlements.Google Scholar
Bernanke, B. S. and James, H. (1991). The gold standard, deflation, and financial crisis in the Great Depression: an international comparison. In Hubbard, R. G. (ed.), Financial Markets and Financial Crises. Chicago: University of Chicago Press.Google Scholar
Brockie, M. D. (1950). Theories of the 1937–38 crisis and depression. The Economic Journal, 60(238), pp. 292–310.CrossRefGoogle Scholar
Calomiris, C. W., Mason, J. and Wheelock, D. (2011). Did doubling reserve requirements cause the recession of 1937–38? A microeconomic approach. NBER Working Paper 16688, January.Google Scholar
Calvo, G. and Reinhart, C. (2002). Fear of floating. Quarterly Journal of Economics, 117, pp. 379–408.CrossRefGoogle Scholar
Carter, S., et al. (2006). Historical Statistics of the United States, vol. 3: Earliest Times to the Present. New York: Cambridge University Press.Google Scholar
Cole, H. L. and Ohanian, L. E. (1999). The great depression in the United States from a neoclassical perspective. Federal Reserve Bank of Minneapolis Quarterly Review, 112(4), pp. 2–24.Google Scholar
Eggertsson, G. B. and Pugsley, B. (2006). The mistake of 1937: a general equilibrium analysis. Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, 24(1), pp. 151–90.Google Scholar
Eichengreen, B. (1990). Elusive Stability: Essays in the History of International Finance, 1919–1939. Cambridge and New York: Cambridge University Press.CrossRefGoogle Scholar
Eichengreen, B. (1992). Golden Fetters: The Gold Standard and the Great Depression, 1919–1939. Oxford and New York: Oxford University Press.Google Scholar
Eichengreen, B. (2004). The British economy between the wars. In Floud, R. and Johnson, P. (eds.), The Cambridge Economic History of Modern Britain, vol. 2: Economic Maturity, 1860–1939. Cambridge: Cambridge University Press.Google Scholar
Eichengreen, B. and Flandreau, M. (2009). The rise and fall of the dollar (or when did the dollar replace sterling as the leading reserve currency?). European Review of Economic History, 13, pp. 377–411.CrossRefGoogle Scholar
Eichengreen, B. and Irwin, D. A. (1995). Trade blocs, currency blocs and the reorientation of world trade in the 1930s. Journal of International Economics, 38, pp. 1–24.CrossRefGoogle Scholar
Eichengreen, B. and Irwin, D. A. (2009). The slide to protectionism in the Great Depression: who succumbed and why? NBER Working Paper 15142, July.CrossRefGoogle Scholar
Feinstein, C. H., Temin, P. and Toniolo, G. (1997). The European Economy Between the Wars. Oxford and New York: Oxford University Press.Google Scholar
Field, A. (2011). The Great Leap Forward: 1930s Depression and U.S. Economic Growth. New Haven: Yale University Press.Google Scholar
Fishback, P. (2010). US monetary and fiscal policy in the 1930s. Oxford Review of Economic Policy, 26(3), 385–413.CrossRefGoogle Scholar
Freidel, F. (1990). Franklin D. Roosevelt: a Rendezvous with Destiny. Boston: Little Brown.Google Scholar
Friedman, M. and Schwartz, A. J. (1963). A Monetary History of the United States 1867–1960. Princeton: Princeton University Press.Google Scholar
Gordon, M. (1941). Barriers to World Trade: A Study of Recent Commercial Policy. New York: Macmillan.Google Scholar
Hsieh, C. T. and Romer, C. (2006). Was the Federal Reserve constrained by the gold standard during the Great Depression? Evidence from the 1932 open market purchase program. Journal of Economic History, 66, pp. 140–76.CrossRefGoogle Scholar
James, H. (2001). The End of Globalization: Lessons from the Great Depression. Cambridge, MA, and London: Harvard University Press.Google Scholar
Johansen, S. (1988). Statistical analysis of cointegration vectors. Journal of Economic Dynamics and Control, 12(2–3), pp. 231–54.CrossRefGoogle Scholar
Lary, H. (1943). The United States in the World Economy. Washington, DC: US Department of Commerce.Google Scholar
Maddison, A. (2006). The World Economy. Paris: OECD Development Centre.CrossRefGoogle Scholar
Meltzer, A. H. (2003). A History of the Federal Reserve, vol. 1: 1913–1951. Chicago: University of Chicago Press.Google Scholar
Miron, J. and Romer, C. (1990). A new monthly index of industrial production, 1884–1940. Journal of Economic History, 50, pp. 321–37.CrossRefGoogle Scholar
Mitchell, B. R. (1988). British Historical Statistics. Cambridge: Cambridge University Press.Google Scholar
Moggridge, D. (ed.) (1982). The Collected Writings of John Maynard Keynes, vol. XXI: Activities 1931–1939: World Crises and Policies in Britain and America. London: The Royal Economic Society.Google Scholar
Mundell, R. (1972). The future of the international financial system. In Acheson, A. L. K. et al. (eds.), Bretton Woods Revisited. London: Macmillan, pp. 91–104.CrossRefGoogle Scholar
Nurkse, R. (1944). International Currency Experience: Lessons of the Inter-War Period. Princeton: Princeton University Press.Google Scholar
Obstfeld, M.Shambaugh, J. and Taylor, A. (2004). Monetary sovereignty, exchange rates, and capital controls: the trilemma in the interwar period. NBER Working Paper 10393, March.CrossRefGoogle Scholar
Officer, L. (2008). Gold standard. In Whaples, R. (ed.), EH.Net Encyclopedia, 26 March, http://eh.net/encyclopedia/article/officer.gold.standard.Google Scholar
Ritschl, A. and Wolf, N. (2003). Endogeneity of currency areas and trade blocs: evidence from the interwar-period. CEPR Discussion Paper 4112.CrossRefGoogle Scholar
Romer, C. D. (1994). Remeasuring business cycles. The Journal of Economic History, 54(3), pp. 573–609.CrossRefGoogle Scholar
Romer, C. D. (2009). The lessons of 1937. The Economist, 20 June.Google Scholar
Roose, K. D. (1954). The Economics of Recession and Revival: an Interpretation of 1937–38. New Haven: Yale University Press.Google Scholar
Shambaugh, J. (2004). The effect of fixed exchange rates on monetary policy. Quarterly Journal of Economics, 119(1), pp. 301–52.CrossRefGoogle Scholar
Straumann, T. (2010). Fixed Ideas of Money: Small States and Exchange Rate Regimes in Twentieth-Century Europe. Cambridge and New York: Cambridge University Press.CrossRefGoogle Scholar
Straumann, T. and Woitek, U. (2009). A pioneer of a new monetary policy? Sweden's price level targeting of the 1930s revisited. European Review of Economic History, 13(2), pp. 251–82.CrossRefGoogle Scholar
Temin, P. (1989). Lessons from the Great Depression. Cambridge, MA: MIT Press.Google Scholar
Thomas, M. (1983). Rearmament and economic recovery in the late 1930s. Economic History Review, 36(4), pp. 552–79.CrossRefGoogle Scholar
Urban, S. (2011). Gold in the interwar monetary system: evolution of the gold-standard regime. Unpublished DPhil thesis, Oxford University.Google Scholar
Velde, F. R. (2009). The recession of 1937 – a cautionary tale. Federal Reserve Bank of Chicago Economic Perspectives, 33(4), pp. 16–37.Google Scholar
Wandschneider, K. and Wolf, N. (2010). Shooting on a moving target: explaining European bank rates during the interwar period. International Journal of Economics and Business Research, 2(1), pp. 31–48.CrossRefGoogle Scholar
Wolf, N. (2010). Europe's great depression: coordination failure after the first world war. Oxford Review of Economic Policy, 26(3), pp. 339–69.CrossRefGoogle Scholar

Sources

The Economist. London (various issues).Google Scholar
Global Financial Data (online dataset). www.globalfinancialdata.com.Google Scholar
LEAGUE OF NATIONS, Monthly Bulletin of Statistics. Geneva: League of Nations (various issues).Google Scholar
LEAGUE OF NATIONS. Statistical Yearbook. Geneva: League of Nations (various years).Google Scholar
NBER Macrohistory: m08002ab: U.K. Insured Workers Unemployed 01/1920-09/1920, 11/1920-10/1939.Google Scholar
NBER Macrohistory: m11009b: U.S. Industrial Stock Price Index, Dow-Jones 12/1914-12/1968.Google Scholar
US FEDERAL RESERVE. Federal Reserve Bulletin (various issues).Google Scholar