Export Performance During the Great Depression

All advanced countries experienced a sharp decline in the volume of exports during the interwar period.  With the onset of the Great Depression, beggar-thy-neighbour policies were introduced to restrict international trade in the hope of maintaining domestic employment.  While focusing mainly on the UK, this paper investigates the export trade performance of the three main industrial countries, the United States, the United Kingdom and Germany.  Aggregate export functions will be estimated for each country over the 1920s and the 1930s, with particular emphasis placed on the changes in trade policy. 

Quarterly data sets will be constructed for the United States, the United Kingdom and Germany from domestic sources.  The data for the UK will be extracted from the Board of Trade Journal and have been rarely used in econometric work, whereas the German data will be from Ritschl (2002) and the source for the US series will be Balke & Gordon (1986).  Time series econometric techniques will be employed to model the export demand equations, especially the approaches for non-stationary data, over a particularly disturbed time period.  

The main objective of the research will be to investigate whether a demand for export function exists for each of the three countries.  Particular emphasis will be placed on comparing the magnitude of the income elasticities of demand and the relative price terms, both of which have implications for the trade policy.  Care will be taken when modelling the various trade regimes.  All equations will be tested for parameter stability and the research will consider the possibility that a structural break in the volume of export demand may have been a key factor in the cause of the Great Depression.  Equally, the role that exports played in the recovery will also be examined.