RESEARCH PAPERS 

Return of the Tariffs: The Interwar Trade Collapse Revisited

Was the collapse of world trade between 1928 and 1937 caused by higher transport costs, increased protectionism or the collapse of the gold standard? Using recent advances in the estimation of gravity equations, I examine the partial and general equilibrium effects of bilateral distance, international borders, and the payment system on trade. My results suggest that had average tariff and non-tariff trade barriers remained at their 1928 level, total international trade would have been 64.6% higher in 1937. Had the gold standard not collapsed in 1931 and had the British Empire not departed to establish its own currency and trade blocs, international trade would have been 3% larger. Finally, had transport costs remained at their 1928 level, global trade would not have been signifcantly different nine years on. These results are supported by over 6,000 new hand-collected observations of ad-valorem ocean freight rates for cotton, which show an average increase of only 1.2 percentage points between 1928 and 1936. When expressed as an index, the movement of freight rates mirrors the evolution of the elasticity of trade to distance over the period.

Liquidating Bankers' Acceptances: International Crisis, Personal Conflict and American Exceptionalism

This paper narrates the early history of the Federal Reserve and its relation to the market for bankers' acceptances, also known as "real bills". I argue that labelling large parts of Fed officials, academics and politicians as "adherents of the real bills doctrine", as in Meltzer (2003), misses insights about important political decisions on monetary issues. I distinguish between the Warburg doctrine, which promotes an active monetary policy of favoring real bills, and the Glass-Willis doctrine, which stresses non-intervention and the self-liquidating nature of real bills. A conflict arose between adherents of the two doctrines that concerned the eligibility of these bills for purchase and rediscount at the Federal Reserve. I argue that the critique put forth against acceptances by Carter Glass and H. Parker Willis was an important factor in the collapse of the market for bankers' acceptances.

Credit Constraints and the Propagation of the Great Depression in Germany, with Walter Jansson

We evaluate the role played by loan supply shocks in the decline of investment and industrial production during the Great Depression in Germany from 1927 to 1932. We identify loan supply shocks in the context of a time varying parameter vector autoregression with stochastic volatility. Our results indicate that credit constraints were a significant driver of industrial production between 1927 and 1932, supporting the view that a structurally weak banking sector was an important contributor to the German Great Depression. We find further that loan supply shocks were an important driver of investment in the early phase of the depression, between 1927 and 1929, but not between 1930 and 1932. We suggest possible explanations for this puzzle and directions for future research.