*Department of Economics, University of Virginia, Charlottesville. I am indebted to Jonathan Eaton, Barry Eichengreen, Charles Engel, June Flanders, Marjorie Flavin, Charles Kindleberger, Ron Michener, Anna Schwartz, and participants in the University of Virginia Macroeconomics Workshop for helpful comments on earlier drafts of this paper. The version here is a revision of one presented at the 62nd Annual Western Economic Association International Conference, Vancouver, B.C., July 1987, in a session organized by Michael D. Bordo, University of South Carolina, Columbia.
ROLE OF THE INTERNATIONAL GOLD STANDARD IN PROPAGATING THE GREAT DEPRESSION
Version of Record online: 2 JUL 2007
Contemporary Economic Policy
Volume 6, Issue 2, pages 67–89, April 1988
How to Cite
HAMILTON, J. D. (1988), ROLE OF THE INTERNATIONAL GOLD STANDARD IN PROPAGATING THE GREAT DEPRESSION. Contemporary Economic Policy, 6: 67–89. doi: 10.1111/j.1465-7287.1988.tb00286.x
- Issue online: 2 JUL 2007
- Version of Record online: 2 JUL 2007
I do not claim in this paper that the international gold standard was a principal cause of the Great Depression. Instead, I explore the events that allowed the world to slip deeper into depression despite the gold standard. The volatility of international short-term capital flows surely contributed greatly to the Depression. I argue that this volatility was exacerbated—rather than ameliorated—by the international gold standard. The reason is that despite governments' legal assurances that they are committed to a gold standard, speculators never perceive the terms of gold parity as immutable. This statement holds with increasing force when one observes the precarious status of government debts and international finance during the 1920s. This reality renders a gold standard vulnerable to precisely the type of volatility in international capital markets that made the 1931 downturn more severe.