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The limits of internal devaluation: Switzerland during the Great Depression


Rosenkranz, Peter; Straumann, Tobias; Woitek, Ulrich (2022). The limits of internal devaluation: Switzerland during the Great Depression. Swiss Journal of Economics and Statistics = Schweizerische Zeitschrift für Volkswirtschaft und Statistik, 158:20.

Abstract

During the Great Depression, countries endowed with abundant gold reserves were not able to leave the gold standard and devalue their currencies until the mid-1930s. Instead, they were forced to go down the road of internal devaluation. We analyze the policies of the Swiss authorities by estimating a New Keynesian small open economy model. Our results show that the long adherence to the gold standard and the failure of internal devaluation imposed considerable costs on the Swiss economy. Moreover, counterfactual exercises suggest that a timely devaluation would have led to an early recovery from the Great Depression.

Abstract

During the Great Depression, countries endowed with abundant gold reserves were not able to leave the gold standard and devalue their currencies until the mid-1930s. Instead, they were forced to go down the road of internal devaluation. We analyze the policies of the Swiss authorities by estimating a New Keynesian small open economy model. Our results show that the long adherence to the gold standard and the failure of internal devaluation imposed considerable costs on the Swiss economy. Moreover, counterfactual exercises suggest that a timely devaluation would have led to an early recovery from the Great Depression.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:06 Faculty of Arts > Institute of History
Dewey Decimal Classification:700 Arts
Scopus Subject Areas:Physical Sciences > Statistics and Probability
Social Sciences & Humanities > Economics and Econometrics
Uncontrolled Keywords:Great Depression, Switzerland, New Keynesian business cycle model
Language:English
Date:2022
Deposited On:08 Jan 2023 13:01
Last Modified:22 Jun 2024 03:44
Publisher:Springer
ISSN:0303-9692
OA Status:Gold
Free access at:Publisher DOI. An embargo period may apply.
Publisher DOI:https://doi.org/10.1186/s41937-022-00100-9
  • Content: Published Version
  • Language: English
  • Licence: Creative Commons: Attribution 4.0 International (CC BY 4.0)