A Small Open Economy in Depression: Lessons from Canada in the 1930s

63 Pages Posted: 28 Dec 2006

See all articles by Caroline Betts

Caroline Betts

University of Southern California - Department of Economics

Michael D. Bordo

Rutgers University, New Brunswick - Department of Economics; National Bureau of Economic Research (NBER)

Angela Redish

University of British Columbia (UBC) - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: November 1993

Abstract

This paper tests the hypothesis that idiosyncratic U.S. disturbances and their international propagation can account for the global Depression. Exploiting common stochastic trends in U.S. and Canadian interwar data, we estimate a small open economy model for Canada that decomposes output fluctuations into sources identifiable with world and country-specific disturbances. We find that the onset, depth and duration of output collapse in both Canada and the U.S. are primarily attributable to a common, permanent output shock leaving little significant role for idiosyncratic disturbances originating in either economy.

Suggested Citation

Betts, Caroline M. and Bordo, Michael D. and Redish, Angela, A Small Open Economy in Depression: Lessons from Canada in the 1930s (November 1993). NBER Working Paper No. w4515. Available at SSRN: https://ssrn.com/abstract=480265

Caroline M. Betts (Contact Author)

University of Southern California - Department of Economics ( email )

KAP 300
Los Angeles, CA 90089
United States
213-740-2430 (Phone)

Michael D. Bordo

Rutgers University, New Brunswick - Department of Economics ( email )

New Brunswick, NJ
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Angela Redish

University of British Columbia (UBC) - Department of Economics ( email )

997-1873 East Mall
Vancouver, BC V6T 1Z1
Canada
604-822-2748 (Phone)
604-822-5915 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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