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- Title
Fiscal policy under constraints: Fiscal capacity and austerity during the Great Depression.
- Authors
Papadia, Andrea
- Abstract
The Great Depression was characterized by widespread fiscal policy mistakes in the form of a contractionary or insufficiently expansionary fiscal stance. Despite this general conclusion, there were large differences in the conduct of fiscal policy between countries. I find that a higher degree of fiscal capacity helped countries run less procyclical fiscal policies by allowing them to borrow more extensively. Lower borrowing costs only partially explain this finding. Taken together, the results indicate that interwar governments were constrained in their policies by past investments in fiscal capacity, and not just by Gold Standard membership, ideology, and inadequate knowledge, as commonly held in the literature.
- Subjects
GREAT Depression, 1929-1939; FISCAL policy; FISCAL capacity; GOLD standard; IDEOLOGY
- Publication
Economic History Review, 2024, Vol 77, Issue 1, p90
- ISSN
0013-0117
- Publication type
Article
- DOI
10.1111/ehr.13253