Abstract
We quantify the role of contractionary monetary shocks and nominal wage rigidities in the U.S. Great Contraction. In contrast to conventional wisdom, we find little increase in the economy-wide real wage over 1929–33, although real wages rose significantly in some industries. In the context of a two-sector model with intermediates and nominal wage rigidities in one sector, contractionary monetary shocks account for only a third of the fall in GDP. Intermediate linkages play an important role, as the output decline without intermediates is almost a third larger at the trough. The role of nominal wage rigidities beyond their interaction with monetary shocks is limited.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
