TRADE BLOCS, CURRENCY BLOCS AND THE REORIENTATION OF WORLD-TRADE IN THE 1930S

We analyze the impact of commercial and financial policies on the reorientation of trade in the 1930s. We report evidence that commercial policies attenuated prior connections between income growth and trade, and that exchange rate instability marginally discouraged international trade. In contrast, the tendency toward regionalization commonly ascribed to the formation of trade and currency blocs was already evident to a considerable extent prior to the regional policy initiatives of the 1930s. This reorientation is more properly attributed to ongoing historical forces such as commercial and financial links between countries forged over many years.