Norway's recovery from the Great Depression – an act of balancing?

Abstract

This paper addresses the question of how Norway recovered from the Great Depression and tries to show that a monocausal Schumpeterian explanation is flawed. Three elements of such an explanation are being discussed and dismissed: the shift in employment structure; the spread of electric power; and the changes in household consumption. The paper comes to a more balanced conclusion. Mainly for chronological reasons, supply-side factors can't independently explain the recovery. Not before 1934–35, when recovery had been underway for roughly two years, did supply-side factors start to have a real impact. Only by viewing these forces in interaction with the demand side, in particular export demand generating an investment boom, can a more plausible explanation of Norway's recovery from the Great Depression be presented.     

Stock price targeting and fiscal deficit in Japan: Why did the fiscal deficit increase during Japan’s lost decades?

The purpose of this paper is to explain why Japan’s fiscal deficit increased so dramatically in the 1990s and the 2000s. We focus on the role of “stock price targeting” to explain why the fiscal expenditure increased so much. After presenting a simple model to describe government behavior with an optimistic view about stock price and output growth, the paper tests whether the model can explain Japan’s fiscal expenditure. The empirical results, using biannual and high-frequency data of the 1990s and the 2000s, show that the stock price targeting can track Japan’s fiscal expenditure reasonably well, especially in the 1990s. They imply that without the stock price targeting, the total amount of biannual fiscal stimulus from 1992 to 2000 would have been lower by 2.5 trillion yen on average.     

Decomposing the U.S. Great Depression: How important were loan supply shocks?

We measure the contributions of loan supply shocks and other macroeconomic shocks to U.S. output dynamics during the Great Depression. Using structural vector autoregressions, we impose sign restrictions to identify shocks. We find that loan supply shocks contributed negatively to output growth between 1931 and 1933, at the same time as the U.S. experienced several waves of banking crises. Thus, our results support the view that disruptions in credit availability contributed to the depth and length of the Great Depression. We also find that adverse aggregate demand and monetary policy shocks were important factors in the downturn.     

Military casualties and exchange rates during the First World War: did the Eastern Front matter?

Although the First World War was ultimately decided in the west, historians have emphasized the importance of the often ‘forgotten’ Eastern Front in understanding its complex evolution. This article examines the perception of contemporary foreign exchange traders concerning the relative importance of the Eastern Front over time. Using a newly compiled dataset on prisoners of war and on soldiers killed and wounded, we show that traders were concerned with casualties on both fronts, recognizing the significance of the two‐front war in the early war years. From the autumn of 1916 onwards, traders seemed to believe the key to winning the war lay in the west only.     

Was Expansionary Monetary Policy Feasible during the Great Contraction? An Examination of the Gold Standard Constraint

The recent consensus view that the gold standard was the leading cause of the worldwide Great Depression 1929-1933 stems from the two propositions: (1) Under the gold standard, deflationary shocks were transmitted between countries and, (2) for most countries, continued adherence to gold prevented monetary authorities from offsetting banking panics and blocked their recoveries. In this article we contend that the second proposition applies only to small open economies with limited gold reserves. This was not the case for the United States, the largest country in the world, holding massive gold reserves. The United States was not constrained from using expansionary policy to offset banking panics, deflation, and declining economic activity. Simulations, based on a model of a large open economy, indicate that expansionary open market operations by the Federal Reserve at two critical junctures (October 1930 to February 1931; September 1931 through January 1932) would have been successful in averting the banking panics that occurred, without endangering convertibility. Indeed had expansionary open market purchases been conducted in 1930, the contraction would not have led to the international crises that followed.     

Why did the United States Evolve from the Largest International Creditor in 1980 to the Largest International Debtor in 1990?

Atlantic Economic Journal - Remarkable transformation of the U.S. international investment position occurred over the last 40 years. U.S. net foreign assets were larger than combined net foreign...     

Investing in the Future during the Economic Depression Period： investment Advice in 2009

赢家法则--不要去预测市场的走势,特别是市场的中、短期走势,而应当把握市场的长期走势. 如果说2007年的市场是大牛市,2008年的市场是大熊市,那么2009年的市场又会是怎样的呢?众所周知2009年经济面临较大的不确定性,纵然不可确定但并非不可预知,任何经济周期中,总有赢家和输家,本文尝试提供一些观点,并尝试在废墟中发现投资机遇.     

Why did the communist party reform in China,but not in the Soviet Union? The political economy of agricultural transition

The dramatic transition from Communism to market economies across Asia and Europe started in the Chinese countryside in the 1970s. Since then more than a billion of people, many of them very poor, have been affected by radical reforms in agriculture. However, there are enormous differences in the reform strategies that countries have chosen. This paper presents a set of arguments to explain why countries have chosen different reform policies.     

Why did socialist economies fail? The role of factor inputs reconsidered

This article presents new estimates for investment and new growth accounts for three socialist economies between 1950 and 1989. Government statistics reported distorted measures for both the rate and the trajectory of productivity growth in Czechoslovakia, Hungary, and Poland. Researchers have benefited from revised output data, but have continued to use official statistics on capital input, or estimated capital stock from official investment data. Investment levels and rates of capital accumulation were much lower than officially claimed and over‐reporting worsened over time. A setback in factor accumulation—both investment in equipment and labour input—contributed very significantly to the socialist growth failure of the 1980s.     

Why did the industrial diet triumph? The massification of dairy consumption in Spain, 1965–90

The rise of a mass, agri‐industrial diet after the Second World War was crucial for the culmination of the nutritional transition that western countries had been involved in since the second half of the nineteenth century—but why did the industrial diet triumph? This article takes the massification of dairy consumption in Spain 1965–90 as a study case. Using a newly constructed database and qualitative material within an evolutionary socio‐economic framework, the article reaches two conclusions. First, the massification of dairy consumption was linked to most households’ transition to a softer budget constraint, which was driven mainly by increasing household incomes (and only secondarily by consumer price reductions caused by food industrialization). Second, the reason why the softening of the budget constraint played such a major role was that it was joined by a substantial increase in consumer trust in dairy products, which in turn resulted from industrial standardization. The article is in line with recent work that underlines the dietary change brought about by food industrialization, but questions whether the latter's major contribution was of a quantitative, price‐related nature and suggests that more attention should be paid to the qualitative, preferences‐related dimension.     

Revisiting Sweden’s response to the Great Depression of the 1930s: economic policy in a regional context

This intra-Scandinavian comparison provides a corrective to existing comparative literature on Sweden's response to the Great Depression at three levels: policy conception, case selection and mode of explanation. The paper's holistic view of economic policy shows that the Swedish response was not just about fiscal policy. A broadly defined Swedish response becomes even less distinctive when compared with its Danish and Norwegian counterparts. The paper makes three points to explain the intra-Scandinavian variation (convergence and divergence). First, the regional-metropolitan context matters. Facing similar international challenges, the three small states developed a defensive reflex by striking domestic compromises, abandoning the gold standard, devaluing their currencies and effecting monetary expansion. Second, the political-economic development experience matters. On one hand, proportional representation entrenched Scandinavian farmers as a critical political force, thus ensuring agricultural protectionism across the region. On the other hand, the cross-national divergence in industrialisation largely shaped industrial policy: Sweden’s relative trade and domestic liberalism sharply contrasted with Denmark’s exchange controls and Norway’s import substitution. Third, ideology matters. Whereas the Danish Social Democrats’ traditional liberalism and their Norwegian counterparts’ radicalism buttressed fiscal orthodoxy, the Swedish Social Democrats’ ideational and programmatic renewal paved the way for the fiscal experiment of the crisis years.     

Feeding the motherland: grain exports from the Swedish Baltic provinces during the Great Famine of 1696–1697

The research carried out so far has explained the Great Famine of 1696–1697 in the Baltic provinces as a result of the total crop failures in 1695–1696 and an inadequate Swedish economic policy that emptied all the stocks in the provinces through massive grain exports to Finland and Sweden. However, both these views are not consistent with the closer study of the grain exports from the major ports of the Baltic provinces during the famine years. The analysis of Tallinn's customs books shows that the grain exports occurred only on a small scale compared to the normal years, due to the strict ban on grain exports to foreign markets. Furthermore, there is no proof that the markets in the bigger towns lacked available grain in those years. It can also be concluded that the volume of the grain exports was hardly enough to alleviate the famine crisis in Finland or Sweden.     

Why is the Labor Share so Low in Turkey?

The labor share in the income of Turkey is confoundingly low according to official figures. By comparison, the average labor share of OECD members is two times higher than that of Turkey. Is this because labor productivity is low, or is it because imperfect competition, which amplifies profits, is overwhelmingly high in Turkey? We estimate preferences, technology parameters, and price markup in a dynamic general equilibrium model to answer this question using GMM. To our surprise, the results suggest that the crucial factor suppressing the share of labor in Turkey is high price markup, and the role of low productivity of labor is negligible. The results are robust to the use of different instrumental variables.     

Why does the Monetary Policy Committee smooth interest rates?

Explanations of why the monetary authorities in different countriesseem to smooth interest rates have focused on the official dislikeof financial market volatility, aspects of the decision-makingprocess, responses to uncertainty, inertial behaviour in a forward-lookingenvironment, and serial correlation of shocks to the policymakers'expectations. This paper first shows that policy has been smoothestand comparable to that in other countries in the period of inflationtargeting with Bank of England control of interest rates since1997. It then uses the remarkably detailed evidence availablefrom the minutes of the Monetary Policy Committee to evaluatethe relevance of the various explanations of smoothing for theUK in this period. The paper concludes that the explanationof interest rate smoothing should be sought primarily in theserial correlation of shocks, together with some minor and short-terminfluences from uncertainty, while the other explanations turnout to be not relevant.     

The end of the Asian Myth: Why were the Experts Fooled?

This article examines the reasons behind the overoptimism of a large segment of the economics profession concerning the performance of East Asian economies, which was shattered by the financial crises of 1997–98. It also shows how the crisis placed into bold relief many institutional characteristics of these economies which negate many past attempts to characterize them as open and market-driven.     

Donor coordination and specialization: did the Paris Declaration make a difference?

We assess whether bilateral and multilateral donors of foreign aid specialized and coordinated their activities with other donors as agreed in the Paris Declaration of 2005. We account for donor heterogeneity, varying aid priorities and recipient characteristics in order to isolate changes in donor behaviour over time. Recent shifts in aid priorities, such as the rising importance of general budget support, have reduced the fragmentation of aid. Nevertheless, our results reveal that aid fragmentation persisted after the Paris Declaration and coordination among donors has even weakened.     

Why did Swedish regional net migration rates fall in the 1970s? The role of policy changes versus structural change, 1945–1985

The relationship between local labour market conditions and regional migration has been widely discussed within research. In Sweden, where interregional migration reached a peak in the 1960s but decreased substantially in the 1970s, the role of economic policy has been especially contended in light of the Swedish model and its official stress on regional mobility. By collecting and creating a new and unique dataset on net-migration, vacancy rates, employment and labour income by county, the pattern of interregional migration in Sweden is analysed over a period of time that also covers the early postwar period (1945–1985), allowing for a detailed evaluation of the drivers of migration at different times. My results suggest that there was no significant change over time in the responsiveness of migration to local labour market conditions. The changing patterns of regional migration were therefore more likely the result of changes in the pace and direction of structural change. I discuss the implications of these results for previous accounts of the Swedish model and of the decline in migration after 1970.