Fiscal policies in Europe and the United States during the Great Depression

Ilja Kristian Kavonius

No 13, Working Papers from VATT Institute for Economic Research

Abstract: Abstract: This paper discusses the fiscal policy reactions and economic policies of European countries and the United States during the Great Depression. Economic as well as economic history literature has tended to overlook the fiscal policy aspects of the Great Depression, in particular in relation to European countries. This paper concentrates specifically on this aspect, providing a comprehensive discourse on the background of the crisis and using for analysis a data set compiled from available international sources. On this basis, central government reactions, mainly on the expenditure side, are analysed. Thus, this paper provides new information concerning the economic policies during the Great Depression and helps to understands how the Great Depression developed. The conclusion reached is that fiscal policies between the two World Wars were mainly neo-classical, i.e. expenditure reacted to the development of revenue. In certain European countries, for example the Netherlands and Sweden, some counter-cyclical fiscal policies can be observed. However, as the governments there were smaller and the effect therefore comparably limited, this did not play a key role in the economic recovery. Finally, the paper briefly discusses the similarities and differences between the Great Depression and the current crisis.

Keywords: Great Depression, fiscal policy, counter-cyclical, keynesian fiscal policy, neo-classical economic policy, economic policy, Macroeconomic policy, Talouspolitiikka, Taxation and Social Transfers, Julkisen talouden rahoitus ja tulonsiirrot, H300 - Fiscal Policies and Behavior of Economic Agents: General, H500 - National Government Expenditures and Related Policies: General, H600 - National Budget, Deficit, and Debt: General, H620 - National Deficit; Surplus, H630 - National Debt; Debt Management, N120 - Economic History: Macroeconomics; Growth and Fluctuations: U.S.; Canada: 1913-, N140 - Economic History: Macroeconomics; Growth and Fluctuations: Europe: 1913-, N420 - Economic History: Government, War, Law, and Regulation: U.S.; Canada: 1913-, N440 - Economic History: Government, War, Law, and Regulation: Europe: 1913-, (search for similar items in EconPapers)
Date: 2010
New Economics Papers: this item is included in nep-cba, nep-his and nep-pbe
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