OECD Forecast a OECD data for the Great Depression are estimates and exclude

Oecd forecast a oecd data for the great depression

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OECD Forecast (a) OECD data for the Great Depression are estimates and exclude Czech Republic, Hungary, Luxembourg, Poland, Slovakia and Turkey. Source: GGDC–Maddison International Historical Database () and OECD Economic Outlook, no. 85, June 2009. Of course, what turned a recession in the 1930s into the Great Depression was the continued collapse in economic output for the subsequent two years, before recovery took hold in 1933. By contrast, in the current global recession, we are now seeing signs of recovery in most OECD countries, and most forecasters expect this recovery to strengthen over the next year or so. Turning to trade, large falls in world trade were a feature of both the Great Depression and the current global recession. While world trade volumes fell by 30 per cent over three years in the Great Depression, they fell much more sharply in the current recession — by almost one–fifth since early 2008 (Chart 2).
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What have we learnt? The Great Depression in Australia from the perspective of today 31 Chart 2: Volume of world trade 60 70 80 90 100 110 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 60 70 80 90 100 110 Jan-29 Jan-30 Jan-31 Jan-32 Jan-33 Now January 2008=100 (bottom) Great Depression January 1929=100 (top) Source: CPB (2009) and League of Nations (1939) compiled in PC (2009). There are also broad similarities in the magnitude of the falls in the US stock market in the first 18 months of the two crises. There had been an extended period of strong growth in stock prices before both crises. 3 In October 1929, the Dow Jones industrial average fell sharply, by 48 per cent by early November 1929. Following a rally in early 1930, the market continued to fall steadily for a further two years to record a scarcely believable 90 per cent collapse from the peak (Chart 3). During the current crisis, US stock price falls were more gradual over the first 12 months, reflecting different patterns of transmission in the two crises. The financial crisis which preceded the Great Depression began with a stock market crash and then spread to the banking system. In contrast, the current financial crisis began in the credit markets and then spread to the banking system and the stock market. 3 US stock prices (the Dow Jones Industrial Average) increased by 240 per cent in the five years leading up to the stock price peak before the Great Depression compared to a more modest 75 per cent rise (in the S&P 500) during the most recent episode. A number of other parallels between the two episodes have been noted, particularly in the US, including rapid financial innovation facilitated in part by new technologies; an extended period of loose monetary policy followed by relatively rapid tightening; relaxation of credit standards; increased leverage of financial institutions and households; increased fraud and other forms of criminal behaviour; and pervasive expectations of continued asset price appreciation combined with a widespread failure to comprehend and price risks appropriately (Eslake 2009).
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What have we learnt? The Great Depression in Australia from the perspective of today 32
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