The Gold Standard and the French Great Depression

Slim Bridji
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Slim Bridji: Université Paris Ouest Nanterre la Défense and EconomiX

No 602, 2010 Meeting Papers from Society for Economic Dynamics

Abstract: The analysis of the Great Depression through the lens of the gold standard theory has been mainly conducted from an international comparative perspective. As far as I know, there is no structural model-based studies of the link between the malfunctioning of the gold standard and the Great Depression. A such analysis would be helpful to assess the role of gold standard in the worldwide depression. Here, I intend to take step into this direction. I develop a gold standard DSGE model which aims to emphasize the working of the gold standard and the link of the latter with the real economy. The fluctuations of the variables of the artificial economy are driven by one real and three nominal shocks. The real shock is assumed to be a productivity shock in the final good sector. The nominal shocks are related to the working of the gold standard: a gold flow shock, a gold backing shock, and a money multiplier shock. The two lastest nominal shocks alter the ratio of the currency value of the monetary gold stock to the nominal money stock as in Bernanke (1995, Journal of Money, Credit, and Banking). I, then, analyze the steady state and dynamic properties of the model in the context of the French Great Depression.

Date: 2010
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