Welcome to Econ Talk, part of the Library of Economics and Liberty. I'm your host Russ Roberts

of George Mason University and Stanford University's Hoover Institution. Our website is econtalk.org

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Today is October 6, 2010, and my guest is Douglas Irwin, the Robert E. Maxwell class of 23

Professor of Arts and Sciences at Dartmouth College. Doug, welcome to Econ Talk.

Thank you for having me. Our topic today is the mysterious way that monetary policy,

and in particular the gold standard, contributed to or caused the Great Depression. And the underappreciated

role, and this is something of a detective story that you've uncovered, the underappreciated

role that France played in that complex series of interactions called the World Economy and the

Post-World War One Era. Here's the opening paragraph of the recent paper you did on the topic,

and we'll put a link up to that paper. A large body of economic research has linked the gold standard

to the length and severity of the Great Depression of the 1930s. The gold standard's fixed exchange

rate regime transmitted financial disturbances across countries, and prevented the use of monetary

policy to address the economic crisis. This conclusion is supported by two compelling observations.

Countries not on the gold standard managed to avoid the Great Depression almost entirely,

while countries on the gold standard did not begin to recover until after they left it.

Talk about to start with what some of those countries were that weren't on the gold standard,

or that left it at various times. Sure. There are two good examples of countries that were not

on the gold standard during this period, and while they suffered recessions because their trading

partners went into the Depression, they themselves did not see the Great Deflation and the Great

...