Lund Papers in Economic History,
Lund University, Department of Economic History

Abstract: Conventional wisdom pretends that currency devaluations contributed to the Great Depression of the 1930s. This paper examines the impact of nominal exchange rates on foreign trade of 14 industrialized countries 1929-1939. If the idea of competitive devaluation holds, one should expect an increase in exports, along with a decline in imports, to trading partners against which the exchange rate epreciated. Tests show that the beggar-thy-neighbour effects of exchange rate adjustments were at most marginal. Moreover, there is evidence that currency depreciations were expansionary not only for countries that devalued but for the international economy as a whole.

Keywords: interwar; Europe; exchange rates; trade; depression

JEL-codes: E31; E52; F31; N14

35 pages, March 5, 2020

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