NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Did France Cause the Great Depression?

Douglas A. Irwin

NBER Working Paper No. 16350
Issued in September 2010
NBER Program(s):   DAE   IFM   ME

The gold standard was a key factor behind the Great Depression, but why did it produce such an intense worldwide deflation and associated economic contraction? While the tightening of U.S. monetary policy in 1928 is often blamed for having initiated the downturn, France increased its share of world gold reserves from 7 percent to 27 percent between 1927 and 1932 and effectively sterilized most of this accumulation. This “gold hoarding” created an artificial shortage of reserves and put other countries under enormous deflationary pressure. Counterfactual simulations indicate that world prices would have increased slightly between 1929 and 1933, instead of declining calamitously, if the historical relationship between world gold reserves and world prices had continued. The results indicate that France was somewhat more to blame than the United States for the worldwide deflation of 1929-33. The deflation could have been avoided if central banks had simply maintained their 1928 cover ratios.

download in pdf format
   (282 K)

email paper

This paper is available as PDF (282 K) or via email.

Acknowledgments

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w16350

Published: “ Le France a-t- elle Causé la Grande Dép ression? ” Revue Française d’économ ie 25 (April 2 01 1) : 3-10 .

Users who downloaded this paper also downloaded these:
Bordo and James w7724 The International Monetary Fund: Its Present Role in Historical Perspective
Dew-Becker and Gordon w13840 The Role of Labor Market Changes in the Slowdown of European Productivity Growth
Grossman and Meissner w16269 International Aspects of the Great Depression and the Crisis of 2007: Similarities, Differences, and Lessons
Eichengreen and Irwin w15142 The Slide to Protectionism in the Great Depression: Who Succumbed and Why?
Sutch w16355 The Unexpected Long-Run Impact of the Minimum Wage: An Educational Cascade
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us