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Devaluation, Exports, and Recovery from the Great Depression

Author

Listed:
  • Jason Lennard

    (London School of Economics (LSE)
    Centre for Economic Policy Research (CEPR)
    Centre for Macroeconomics (CFM)
    Economic Statistics Centre of Excellence)

  • Meredith M. Paker

    (Grinnell College)

Abstract

This paper evaluates how a major policy shift - the suspension of the gold standard in September1931 - affected employment outcomes in interwar Britain. We use a new high-frequency industry-level dataset and difference-in-differences techniques to isolate the impact of devaluation on exporters. At the micro level, we find that the break from gold reduced the unemployment rate by 2.7 percentage points for export-intensive industries relative to more closed industries. At the aggregate level, this effect stimulated the labor market, the fiscal outlook, and economic growth. Devaluation was therefore an important initial spark of recovery from the depths of the Great Depression.

Suggested Citation

  • Jason Lennard & Meredith M. Paker, 2023. "Devaluation, Exports, and Recovery from the Great Depression," Discussion Papers 2403, Centre for Macroeconomics (CFM).
    • Handle: RePEc:cfm:wpaper:2403
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    References listed on IDEAS

    as
    1. Jason Lennard, 2020. "Uncertainty and the Great Slump," Economic History Review, Economic History Society, vol. 73(3), pages 844-867, August.
    2. Nicholas Crafts, 2013. "Returning to Growth: Policy Lessons from History," Fiscal Studies, Institute for Fiscal Studies, vol. 34(2), pages 255-282, June.
    3. Bowden, S. & Higgins, D.M. & Price, C., 2006. "A very peculiar practice: Underemployment in Britain during the interwar years," European Review of Economic History, Cambridge University Press, vol. 10(1), pages 89-108, April.
    4. Joshua K. Hausman & Paul W. Rhode & Johannes F. Wieland, 2019. "Recovery from the Great Depression: The Farm Channel in Spring 1933," American Economic Review, American Economic Association, vol. 109(2), pages 427-472, February.
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    6. Jason Lennard & Finn Meinecke & Solomos Solomou, 2023. "Measuring inflation expectations in interwar Britain," Economic History Review, Economic History Society, vol. 76(3), pages 844-870, August.
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    10. Emi Nakamura & J?n Steinsson, 2014. "Fiscal Stimulus in a Monetary Union: Evidence from US Regions," American Economic Review, American Economic Association, vol. 104(3), pages 753-792, March.
    11. Dimsdale, Nicholas H & Horsewood, Nicholas, 1995. "Fiscal Policy and Employment in Interwar Britain: Some Evidence from a New Model," Oxford Economic Papers, Oxford University Press, vol. 47(3), pages 369-396, July.
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    More about this item

    Keywords

    exports; gold standard; interwar Britain; unemployment;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-

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