Working Paper BETA #2021-21

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Title : The Gold Standard and the International Dimension of the Great Depression

Author(s) : Luca Pensieroso, Romain Restout

Abstract : Was the Gold Standard a major determinant of the onset and 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 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, 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 : Great Depression, Gold Standard, Open Macroeconomics, Dynamic General Equilibrium

JEL Classification : N10, E13, N01