A quarterly model of the US economy during and after World War I

Abstract

This paper develops a small simulation model of the US economy for the period 1915–1922. The focus of the model is to allow monetary and fiscal policy simulations to determine the impacts of alternate policies on total spending, real output, prices, and unemployment. The actual pattern of price-output movements during this period indicates a stable aggregate supply relationship. Thus, policy simulations of this type are appropriate for this period. Both monetary and fiscal policy measures have important impacts on demand, but simulations indicate that monetary disturbances account for the cyclical movements during this period.