It seems to be part of the folk wisdom in macroeconomics that this is in fact how the Great Depression came to an end: the massive one time fiscal jolt from the war pushed the economy into a more favorable equilibrium. However, Christina Romer contends that most of the out- put gap created during 1929-33 had been eliminated before there was any significant fiscal stimulus. She argues that the main explanation of that expansion was a sharp decline in real interest rates, which she attributes to monetary policy (although most of the decline in her estimate of the real interest rate is actually due to changes in the inflation rate rather than the nominal interest rate). Indeed, Romer estimates that for most of the recovery period ex ante real rates were sharply negative, ranging between -5 and – 10 percent.
My point is that the end of the Depression, which is the usual, indeed perhaps the sole, motivating example for the view that a one-time fiscal stimulus can produce sustained recovery, does not actually appear to fit the story line too well. Much, though by no means all, of the recovery from that particular liquidity trap seems to have depended on inflation expectations that made real interest rates substantially negative.
But in 2011 he embraces the “folk wisdom”:
As regular readers know, I’ve pointed out that World War II ended the Great Depression. Then critics say, how could war, a destructive activity, do anything good? I answer that when the economy is in a liquidity trap, there are a lot of perverse consequences. And then the critics declare that I’m a warmonger.
For a countervaling view see here:
In his 2008 book, The Return of Depression Economics and the Crisis of 2008, Paul Krugman writes: “The Great Depression in the United States was brought to an end by a massive deficit-financed public works program, known as World War II.”
Update: Another Paul (Samuelson), who believed the war had ended the GD, (naturally) predicted in 1943:
“The final conclusion to be drawn from our experience at the end of the last war is inescapable—were the war to end suddenly within the next 6 months, were we again planning to wind up our war effort in the greatest haste, to demobilize our armed forces, to liquidate price controls, to shift from astronomical deficits to even the large deficits of the thirties—then there would be ushered in the greatest period of unemployment and industrial dislocation which any economy has ever faced.”