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Still tied by golden fetters: the global response to the US recession of 1937–19381

Published online by Cambridge University Press:  06 March 2012

Scott Urban  and
Tobias Straumann
Scott Urban
Affiliation:
University of Oxford, scott.urban@gmail.com
Tobias Straumann
Affiliation:
University of Zurich, straumann@iew.uzh.ch
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Abstract

The US recession of 1937–8 is one of the deepest on record. Yet it did not produce a global depression – quite unlike 1930. According to the standard view, this reflected an unfettering of central banking after the collapse of the international gold standard circa 1931. We challenge this view. While Germany and a couple of Central and Eastern European countries were sheltered by binding exchange controls, most countries were still constrained by their golden fetters, as our new exchange rate regime classification suggests. The underlying policy regime was surprisingly similar to that of the 1929–30 downturn. What mattered was a quick reversal in US policy in 1938 and, for many countries, a more plentiful stock of international reserves.

Keywords

interventionreservesfixed exchange ratesgold standardsterling area

JEL classification

N14: Europe: 1913– N10: General, International, or Comparative N12: U.S. • Canada: 1913–
Type
Articles
Information
Financial History Review , Volume 19 , Issue 1 , April 2012 , pp. 21 - 48
Copyright
Copyright © European Association for Banking and Financial History e.V. 2012

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