Working Paper BETA #2019-23

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Title : The Gold Standard and the Great Depression: a Dynamic General Equilibrium Model

Author(s) : Luca Pensieroso, Romain Restout

Abstract : Was the Gold Standard a major determinant of the onset and the protracted character of the Great Depression of the 1930s in the United States and Worldwide? In this paper, we model the ‘Gold-Standard hypothesis’ in a dynamic general equilibrium framework. We show that encompassing the international and monetary dimensions of the Great Depression is important to understand what happened in the 1930s, especially outside the United States. Contrary to what is often maintained in the literature, our results suggest that the vague of successive nominal exchange rate devaluations coupled with the monetary policy implemented in the United States did not act as a relief. On the contrary, they made the Depression worse.

Key-words : Gold Standard, Great Depression, Dynamic General Equilibrium

JEL Classification : N10, E13, N01