Picture of Open Access badges

Discover Open Access research at Strathprints

It's International Open Access Week, 24-30 October 2016. This year's theme is "Open in Action" and is all about taking meaningful steps towards opening up research and scholarship. The Strathprints institutional repository is a digital archive of University of Strathclyde research outputs. Explore recent world leading Open Access research content by University of Strathclyde researchers and see how Strathclyde researchers are committing to putting "Open in Action".


Image: h_pampel, CC-BY

Hawtreyan 'credit deadlock' or Keynesian 'liquidity trap'? Lessons for Japan from the Great Depression

Sandilands, R.J. (2010) Hawtreyan 'credit deadlock' or Keynesian 'liquidity trap'? Lessons for Japan from the Great Depression. In: David Laidler's Contributions to Economics. Palgrave McMillan, Houndmills, pp. 329-365. ISBN 9780230018983

Full text not available in this repository. (Request a copy from the Strathclyde author)


This paper outlines the ideas of Ralph Hawtrey and Lauchlin Currie on the need for monetised fiscal deficit spending in 1930s USA to combat the deep depression into which the economy had been allowed to sink. In such exceptional circumstances of "credit deadlock" in which banks were afraid to lend and households and business afraid to borrow, the deadlock could best be broken through the spending of new money into circulation via large fiscal deficits. This complementarity of fiscal and monetary policy was shown to be essential, and as such indicates the potential power of monetary policy – in contrast to the Keynesian "liquidity trap" view that it is powerless This lesson was not learned by the Japanese authorities in their response to the asset price collapse of 1991-92, resulting in a lost decade as ballooning fiscal deficits were neutralised throughout the 1990s by unhelpfully tight monetary policy with the Bank of Japan refusing to monetise the deficits.