Abstract
In the decade of the 1930s the Spanish economy reported a slowdown of 20%, less severe than the one in the US, France and Germany, but very similar to those experienced by Italy and the UK.In contrast to the previous literature, we use an explicit macroeconomic model to analyze the Great Depression in Spain.We study this period from the perspective of the neoclassical growth theory, taking total factor productivity [TFP] as exogenous. We find that TFP accounts for most of the downturn of the Spanish economy throughout this period, but overestimates the evolution of the GDP per working-age person as well as worked hours at the end of the period (1933–1935). When terms of trade shocks are considered, the model accounts for the evolution of foreign trade in the 1930s, but the results are not significantly improved.Finally, introducing frictions in the labor market helps to explain the evolution of aggregate magnitudes and find a better performance of the model mainly for the period 1933–1935.
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