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Wholesale Price Index (WPI), Consumer Price Index (CPI) and Nominal Wage in Switzerland, 1929-39 (1929 = 100) Data Source: SNB (1944)
Source publication
During the Great Depression, countries endowed with abundant gold reserves were not able to leave the gold standard and devalue their currencies until the mid-1930s. Instead, they were forced to go down the road of internal devaluation. We analyze the policies of the Swiss authorities by estimating a New Keynesian small open economy model. Our resu...
Contexts in source publication
Context 1
... In sync with the collapse of world trade wholesale prices declined by a third between 1929 and 1933, pushing down consumer prices nearly 20 percent within the same period of time. By contrast, the average nominal wage remained stable before entering the downward slope in 1932. By 1936, the beginning of the recovery, it had decreased by 10 percent (Fig. 2). As the decline of CPI was more accentuated then the decline of the average nominal wage, the average real wage was still about 5 percent higher in 1936 than in 1929. In other words, internal devaluation was happening, but only to a limited extent and at a considerable ...
Context 2
... the asynchrony of external and domestic business cycles does not explain the full extent of the wedges shown in Fig. 2. First, the large gap between WPI and CPI persisted after 1933, suggesting considerable price rigidity. A historical analysis of the political economy of crisis management explains the reason. As the crisis wore on and nominal wages began to fall after 1931, the popular support for internal devaluation gradually eroded. Business ...
