Italy and the Great Depression: an analysis of the Italian economy, 1929-1936

We study the performance of the Italian economy during the period 1929-1936 using monthly data. The main contention of the paper is that the Italian depression, comparable to that of other major industrialized countries, was the combined result of a contraction in world demand and of the restrictive monetary policies imposed by the rules of the Gold Standard. The results obtained through the estimation of a series of structural VAR models are consistent with this view and indicate also that deflation affected output mainly by increasing real wages. We do not find evidence, however, of the role of financial factors as a major independent determinant of the depressio