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

Research output: Chapter in Book/Report/Conference proceedingChapter


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 languageEnglish (US)
Title of host publicationEconomic Policy 62
PublisherJohn Wiley and Sons
Number of pages47
ISBN (Print)9781405197007
StatePublished - Sep 2 2012


  • 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)


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