From Great Depression to Great Credit Crisis: Similarities, Differences and Lessons

Miguel Almunia; Agustín Bénétrix; Barry Eichengreen; Gisela Rua; Silvana Tenreyro; Fabrizio Perri; Kevin O'Rourke

doi:10.1002/9781444390261.ch1

From Great Depression to Great Credit Crisis: Similarities, Differences and Lessons

Miguel Almunia, Agustín Bénétrix, Barry Eichengreen, Gisela Rua, Silvana Tenreyro, Fabrizio Perri, Kevin O'Rourke

Economics

Research output: Chapter in Book/Report/Conference proceeding › Chapter

Abstract

The Great Depression of the 1930s and the Great Credit Crisis of the 2000shad similar causes but elicited strikingly different policy responses. While itremains too early to assess the effectiveness of current policy, it is possible toanalyse monetary and fiscal responses in the 1930s as a natural experiment orcounterfactual capable of shedding light on the impact of current policies. Weemploy vector autoregressions, instrumental variables, and qualitative evidencefor 27 countries in the period 1925-39. The results suggest that monetary andfiscal stimulus was effective - that where it did not make a difference it wasnot tried. They shed light on the debate over fiscal multipliers in episodes offinancial crisis. They are consistent with multipliers at the higher end of thoseestimated in the recent literature, and with the argument that the impact offiscal stimulus will be greater when banking systems are dysfunctional andmonetary policy is constrained by the zero bound.

Original language	English (US)
Title of host publication	Economic Policy 62
Publisher	John Wiley and Sons
Pages	219-265
Number of pages	47
ISBN (Print)	9781405197007
DOIs	https://doi.org/10.1002/9781444390261.ch1
State	Published - Sep 2 2012

Keywords

Current crisis and the exchange rate regime, shaping policy responses
Decline in manufacture in the peak of 2008, as akin in 1929
Employing vector autoregressions, instrumental variables, and qualitative evidence
Fiscal multipliers in episodes of financial crisis, light on debate
From the Great Depression to the Great Credit Crisis, parallels/differences
Global stock markets, falling even faster than the Great Depression
Monetary policy in a near-zero-interest-rate liquidity-trap 2009, unlike 1930s
Monetary/fiscal responses of the 1930s, light on current policies
Real estate boom, declining lending/securitization, global imbalances adding fire
The Great Credit Crisis, 'surpassed' the Great Depression destroying World trade

ASJC Scopus subject areas

Economics, Econometrics and Finance(all)

Access to Document

10.1002/9781444390261.ch1

Cite this

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abstract = "The Great Depression of the 1930s and the Great Credit Crisis of the 2000shad similar causes but elicited strikingly different policy responses. While itremains too early to assess the effectiveness of current policy, it is possible toanalyse monetary and fiscal responses in the 1930s as a natural experiment orcounterfactual capable of shedding light on the impact of current policies. Weemploy vector autoregressions, instrumental variables, and qualitative evidencefor 27 countries in the period 1925-39. The results suggest that monetary andfiscal stimulus was effective - that where it did not make a difference it wasnot tried. They shed light on the debate over fiscal multipliers in episodes offinancial crisis. They are consistent with multipliers at the higher end of thoseestimated in the recent literature, and with the argument that the impact offiscal stimulus will be greater when banking systems are dysfunctional andmonetary policy is constrained by the zero bound.",

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From Great Depression to Great Credit Crisis: Similarities, Differences and Lessons

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Keywords

ASJC Scopus subject areas

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