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Recent experience has made clear the importance of macroeconomic stability, and exchange rate stability in particular, in generating support for regional integration. The tensions created by exchange-rate and financial volatility are clearly evident in the recent history of Mercosur and may also hinder the development of a Free Trade Area of the Americas. This essay argues that ambitious schemes for a single regional currency are not a practical response to this problem. Nor would a system of currency pegs or bands be sufficiently durable to provide a lasting solution. Instead, countries must solve this problem at home. In practice, this means adopting sound and stable monetary policies backed by a clear and coherent operating strategy, such as inflation targeting. With such policies in place, exchange rate volatility can be reduced to levels compatible with regional integration.
This article reconstructs the history of mutual assistance among Federal Reserve Banks. We present data on accommodation operations through which Reserve Banks mutualized gold reserves in emergency situations between 1913 and 1960. Reserve sharing was important in response to liquidity crises and bank runs. Such cooperation was essential for the cohesion of the U.S. monetary union. But fortunes could change, with emergency recipients of gold becoming providers. Because imbalances did not endlessly grow, instead narrowing when region-specific shocks subsided, mutual assistance created only limited tensions. These findings speak to the current debate over TARGET2 balances in Europe.
Becoming a professor was easier than becoming an economist. Growing up in Berkeley I was surrounded by professors; they dominated my parents’ dinner parties, though my mother and father themselves were not academics. The conversation touched on book projects, sabbatical plans, and foreign travel. There was the security of a regular paycheck but, so it seemed, no one resembling a boss.
Growing up in Berkeley had its distinctive aspects. An outing for the socially conscious among my high school classmates was going down to the university and getting tear-gassed. At about this time the high school curriculum compelled one to choose between the natural sciences, social sciences, and humanities tracks. Social sciences were irresistible for someone growing up in this political petri dish. The natural sciences track, in contrast, would have meant more math. Early decisions have long-term consequences.
The University of California, Santa Cruz, where I was an undergraduate, was another child of the 1960s. Intended as an alternative to factory schools like Berkeley, it had no grades, few major and breadth requirements, and little intellectual structure. Students were encouraged to design their own majors. This encouraged healthy disrespect for conventional academic boundaries, something that comes in handy for an economic historian. Santa Cruz also sent me for my junior year to the University of St. Andrews. St. Andrews students met periodically with a tutor to discuss assignments and read papers. My tutor was the Spanish economic historian Geoffrey Parker. In my senior year back at Santa Cruz, the department hired as a visitor a brilliant graduate student from Stanford, Flora Gill, to teach a course in economic history.
We examine the impact of the Great Depression on the share of votes for right-wing extremists in elections in the 1920s and 1930s. We confirm the existence of a link between political extremism and economic hard times as captured by growth or contraction of the economy. What mattered was not simply growth at the time of the election, but cumulative growth performance. The impact was greatest in countries with relatively short histories of democracy, with electoral systems that created low hurdles to parliamentary representation, and which had been on the losing side in World War I.
“The lessons of history” were widely invoked in 2008/09 as analysts and policymakers sought to make sense of the global financial crisis. Specifically, analogies with the early stages of the Great Depression of the 1930s were widely drawn. Building on work in cognitive science and literature on foreign policy making, this article seeks to account for the influence of this particular historical analogy and asks how it shaped both perceptions and the economic policy response. It asks how historical scholarship might be better organized to inform the process of economic policymaking. It concludes with some reflections on how research in economic history will be reshaped by the crisis.