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The Great Depression in Canada and the United States: A Neoclassical Perspective

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  • Pedro Amaral

    (University of Minnesota)

  • James C. MacGee

    (Unversity of Minnesota)

Abstract

Canada suffered a major depression from 1929 to 1939. In terms of output, it was similar to the Great Depression in the United States. However, total factor productivity (TFP) in Canada did not recover relative to trend, the in the United States TFP had revered by 1937. We find that the neoclassical growth model, with TFP treated as exogenous, can account for over half of the decline in output relative to trend in Canada. In contrast, we find that conventional explanations for the Great Depression - monetary shocks, terms of trade shocks and labor market and competition policies - do not work for Canada. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1006/redy.2001.0141
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Bibliographic Info

Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 5 (2002)
Issue (Month): 1 (January)
Pages: 45-72

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Handle: RePEc:red:issued:v:5:y:2002:i:1:p:45-72

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Keywords: Great Depression; Canada; productivity; terms of trade; deflation;

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  1. Christopher J. Erceg & Michael D. Bordo & Charles L. Evans, 2000. "Money, Sticky Wages, and the Great Depression," American Economic Review, American Economic Association, vol. 90(5), pages 1447-1463, December.
  2. Bernanke, Ben S, 1995. "The Macroeconomics of the Great Depression: A Comparative Approach," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(1), pages 1-28, February.
  3. David Backus & Patrick J. Kehoe & Finn E. Kydland, 1993. "International Business Cycles: Theory and Evidence," NBER Working Papers 4493, National Bureau of Economic Research, Inc.
  4. Lee E. Ohanian, 2001. "Why did productivity fall so much during the Great Depression?," Staff Report 285, Federal Reserve Bank of Minneapolis.
  5. Bernanke, Ben S & Parkinson, Martin L, 1991. "Procyclical Labor Productivity and Competing Theories of the Business Cycle: Some Evidence from Interwar U.S. Manufacturing Industries," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 439-59, June.
  6. Michael D. Bordo & Angela Redish, 1987. "Credible Commitment and Exchange Rate Stability: Canada's Interwar Experience," NBER Working Papers 2431, National Bureau of Economic Research, Inc.
  7. Ellen McGrattan, 2001. "Predicting the effects of Federal Reserve policy in a sticky price model: an analytical approach," Proceedings, Federal Reserve Bank of San Francisco, issue Jun.
  8. Ben S. Bernanke, 1983. "Non-Monetary Effects of the Financial Crisis in the Propagation of the Great Depression," NBER Working Papers 1054, National Bureau of Economic Research, Inc.
  9. Haubrich, Joseph G., 1990. "Nonmonetary effects of financial crises : Lessons from the great depression in Canada," Journal of Monetary Economics, Elsevier, vol. 25(2), pages 223-252, March.
  10. Harold L. Cole & Lee E. Ohanian, 2001. "New Deal policies and the persistence of the Great Depression: a general equilibrium analysis," Working Papers 597, Federal Reserve Bank of Minneapolis.
  11. Crucini, M.J. & Kahn, J., 1994. "Tarrifs and Aggregate Economic Activity: Lessons from the Great Depression," RCER Working Papers 383, University of Rochester - Center for Economic Research (RCER).
  12. Harold L. Cole & Lee E. Ohanian, 2000. "Re-examining the contributions of money and banking shocks to the U.S. Great Depression," Staff Report 270, Federal Reserve Bank of Minneapolis.
  13. Harold L. Cole & Lee E. Ohanian, 1999. "The Great Depression in the United States from a neoclassical perspective," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 2-24.
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