The Ends of 27 Big Depressions

Abstract: How did countries recover from the Great Depression? In this paper, we explore the argument that leaving the gold standard helped by boosting inflationary expectations, lowering real interest rates, and stimulating interest-sensitive expenditures. We do so for a sample of 27 countries, using modern nowcasting methods and a new dataset containing more than 230,000 monthly and quarterly observations for over 1,500 variables. In those cases where the departure from gold happened on well-defined dates, inflationary expectations clearly rose in the wake of departure. Instrumental variable, difference-in-difference, and synthetic matching techniques suggest that the relationship is causal.

JEL Classification: E31, E32, E42, E43, F30, N10, N20

Cite this paper: Ellison, Martin, Sang Seok Lee, and Kevin Hjortshøj O’Rourke. 2024. “The Ends of 27 Big Depressions.” American Economic Review114 (1): 134-68.