The Macroeconomic History of the 1930s: Professor Nicholas Crafts
Department of Business and Economics, University of Southern Denmark
October 21-23, 2013
The course will review quantitative economic history research on depression and recovery in the 1930s. The main focus will be to set out and to evaluate important empirical contributions, especially those relating to the United States, and draw out their implications for today’s policy debates. A useful textbook is N. Crafts and P. Fearon (eds.), The Great Depression of the 1930s: Policy Lessons for Today (Oxford University Press, 2013).
Programme
Monday October 21, 2013
10:00-12:00: “The Disintegration of the World Economy in the 1930s”
This lecture will provide an overview of key macroeconomic developments and economic policy changes together with a preliminary analysis of explanations for the trade and currency wars which erupted.
Readings:
Eichengreen, B. and Irwin, D. (2010) ‘The Slide to Protectionism in the Great Depression: Who Succumbed and Why?’ Journal of Economic History, Vol. 70, No. 4, pp. 871-897.
Wolf, N. (2008) ‘Scylla and Charybdis: Explaining Europe’s Exit from Gold, January 1928 to December 1936’. Explorations in Economic History, Vol. 45, No. 4, pp. 383-401.
13:00-14:00: “The Implications of the Collapse of the Gold Standard”
This lecture will explore the role that membership the gold standard entailed for the transmission of macroeconomic shocks and the consequences of leaving gold for the design of macroeconomic policy and achieving economic recovery.
Reading:
Bernanke, B. and Carey, K. (1996), “Nominal Wage Stickiness and Aggregate Supply in the Great Depression”, Quarterly Journal of Economics, 111, 853-883.
14:30-15:30: “The Future of the Euro in the Mirror of the 1930s”
This lecture will consider what the precedent of the 1930s’ collapse of the gold standard says about the viability of the Eurozone using the lens of Rodrik’s ‘political trilemma’.
Reading:
Crafts, N. (2013), “What Does the 1930s’ Experience Tell Us about the Future of the Eurozone?” , University of Warwick CAGE Working Paper No. 142. Tuesday October 22, 2013
10:00-12:00: “The Great Depression in the United States, 1929-1933”
This lecture will consider how far Friedman and Schwartz’s classic account of the reasons for the slide into depression has survived subsequent research. In particular, it will consider the challenges provided by a real business cycle approach and by research on the causes of bank failures.
Readings:
Inklaar, R., de Jong, H. and Gouma, R. (2011), “Did Technology Shocks Drive the Great Depression? Explaining Cyclical Movements in U. S. Manufacturing”, Journal of Economic History, 71, 827-858.
Richardson, G. and Troost, W. (2009), “Monetary Intervention Mitigated Banking Panics during the Great Depression: Quasi-Experimental Evidence from a Federal Reserve Border District, 1929- 1933”, Journal of Political Economy, 117, 1031-1073.
13:00-14:00: “What Were the Implications of Bank Failures for the Real Economy?”
This lecture will examine the Bernanke-Fisher hypothesis that bank failures led to substantial falls in real GDP and, in particular, will review the evidence relating to the transmission mechanism.
Reading:
Calomiris, C. and Wilson, B. (2004), “Bank Capital and Portfolio Management: the 1930s ‘Capital Crunch’ and the Scramble to Shed Risk”, Journal of Business, 77, 421-455.
14:30-15:30: “What are the Lessons for Bank Regulation?”
This lecture considers the regulatory response to the 1930s’ American banking crisis including the Glass-Steagall Act and the lessons for regulators today.
Reading:
Miles, D., Yang, J. and Marcheggiano,G. (2013), “Optimal Bank Capital”, Economic Journal, vol. 123, 1-37.
Wednesday October 23, 2013
10:00-12:00: “Recovery in the United States, 1933-41”
This lecture will review the roles of fiscal and monetary policy in promoting recovery in the United States from 1933. In particular, it will consider the implications of the New Deal and ‘regime change’ in an economy where interest rates were at the ZLB.
Reading
Calomiris, C., Mason, J. and Wheelock, D. (2011), “Did Doubling Reserve Requirements Cause the Recession of 1937/8? A Microeconomic Approach”, NBER Working Paper No. 16688. Eggertsson, G. (2008), “Great Expectations and the End of the Depression”, American Economic Review, 98, 1476-1516.
13:00-14:00: “Recovery in the United Kingdom after 1932: a Contrasting Experience”
This lecture will consider the two phases of recovery at the ZLB in the UK, the first under the unconventional monetary policy inaugurated in 1932 and the second in the years of rearmament after 1935 with a focus on the role of the Bank of England and the size of the fiscal multiplier.
Reading:
Middleton, R. (2011), “Macroeconomic Policy between the Wars”, Economic History Review, 64(3), i- xxxi.
14:30-15:30: “Self-Defeating Austerity?”
This lecture will consider the lessons from the1930s of the implications of fiscal consolidation and financial repression in an economy with a high public debt to GDP ratio.
Reading:
Crafts, N. and Mills, T. C. (2012), “Fiscal Policy in a Depressed Economy: Was There a ‘Free Lunch’ in 1930s’ Britain?”, University of Warwick CAGE Working Paper No. 103.