Title

What Ended the Great Depression? Re-Evaluating the Role of Fiscal Policy

Publication Date

2014

Journal

Cambridge Journal of Economics

Volume

38

Issue

2

First Page

349

Last Page

367

Abstract

Conventional wisdom contends that fiscal policy was of secondary importance for the economic recovery in the 1930s. The recovery is then connected to monetary policy that allowed non-sterilised gold inflows to increase the money supply. Often this is shown by measuring the fiscal multipliers and demonstrating that they were relatively small. This paper shows that problems with the conventional measures of fiscal multipliers in the 1930s may have created an incorrect consensus on the irrelevance of fiscal policy. The rehabilitation of fiscal policy is seen as a necessary step in the reinterpretation of the positive role of New Deal policies for the recovery.

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