TY - JOUR AU - Almunia,Miguel AU - Bénétrix,Agustín S. AU - Eichengreen,Barry AU - O'Rourke,Kevin H. AU - Rua,Gisela TI - From Great Depression to Great Credit Crisis: Similarities, Differences and Lessons JF - National Bureau of Economic Research Working Paper Series VL - No. 15524 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15524 L1 - http://www.nber.org/papers/w15524.pdf N1 - Author contact info: Miguel Almunia Department of Economics University of California, Berkeley E-Mail: malmunia@econ.berkeley.edu Agustín S. Bénétrix Department of Economics and IIIS Trinity College Dublin E-Mail: benetria@tcd.ie Barry Eichengreen Department of Economics University of California, Berkeley 549 Evans Hall 3880 Berkeley, CA 94720-3880 Tel: 510/642-2772 Fax: 510/643-0926 E-Mail: eichengr@econ.Berkeley.edu Kevin H. O'Rourke All Souls College Oxford University Oxford OX1 4AL, UK Tel: + 44 (0)1865 279 348 Fax: 353-1-6772503 E-Mail: kevin.orourke@all-souls.ox.ac.uk Gisela Rua Department of Economics University of California, Berkeley E-Mail: grua@econ.berkeley.edu AB - The Great Depression of the 1930s and the Great Credit Crisis of the 2000s had similar causes but elicited strikingly different policy responses. It may still be too early to assess the effectiveness of current policy responses, but it is possible to analyze monetary and fiscal policies in the 1930s as a “natural experiment” or “counterfactual” capable of shedding light on the impact of recent policies. We employ vector autoregressions, instrumental variables, and qualitative evidence for a panel of 27 countries in the period 1925-1939. The results suggest that monetary and fiscal stimulus was effective – that where it did not make a difference it was not tried. The results also shed light on the debate over fiscal multipliers in episodes of financial crisis. They are consistent with multipliers at the higher end of those estimated in the recent literature, consistent with the idea that the impact of fiscal stimulus will be greater when banking system are dysfunctional and monetary policy is constrained by the zero bound. ER -