International Aspects of the Great Depression and the Crisis of 2007: Similarities, Differences, and Lessons

45 Pages Posted: 24 Aug 2010 Last revised: 25 Jul 2011

See all articles by Richard S. Grossman

Richard S. Grossman

Wesleyan University - Economics Department; Institute for Quantitative Social Sciences - Harvard University; Centre for Economic Policy Research

Christopher M. Meissner

University of California, Davis

Date Written: August 2010

Abstract

We focus on two international aspects of the Great Depression--financial crises and international trade-- and try to discern lessons for the current economic crisis. Both downturns featured global banking crises which were generated by boom-slump macroeconomic cycles. During both crises, world trade collapsed faster than world incomes and the trade decline was highly synchronized across countries. In the Depression, income losses and rises in trade barriers explain trade's collapse. Due to vertical specialization and more intense trade in durables, today's trade collapse is due to uncertainty and small shocks to trade costs hitting international supply chains. So far, the global economy has avoided the global trade wars and banking collapses of the Depression perhaps due to improved policy. Even so, the global economy remains susceptible to large shocks due to financial innovation and technological change as recent events illustrate.

Suggested Citation

Grossman, Richard S. and Meissner, Christopher M., International Aspects of the Great Depression and the Crisis of 2007: Similarities, Differences, and Lessons (August 2010). NBER Working Paper No. w16269. Available at SSRN: https://ssrn.com/abstract=1663532

Richard S. Grossman (Contact Author)

Wesleyan University - Economics Department ( email )

Middletown, CT 06459
United States
(860) 685-2356 (Phone)
(860) 685-2781 (Fax)

HOME PAGE: http://rgrossman.web.wesleyan.edu

Institute for Quantitative Social Sciences - Harvard University ( email )

1875 Cambridge Street
Cambridge, MA 02138
United States

Centre for Economic Policy Research ( email )

London
United Kingdom

Christopher M. Meissner

University of California, Davis ( email )

One Shields Avenue
Davis, CA 95616
United States

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