IDEAS home Printed from https://ideas.repec.org/p/ctl/louvec/2007025.html
   My bibliography  Save this paper

The Great Depression in Belgium from a Neo-Classical Perspective

Author

Listed:
  • Luca, PENSIEROSO

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics)

Abstract

This paper casts the Belgian Great Depression of the 1930s within a dynamic stochastic general equilibrium (DSGE) framework. Results show that a total factor productivity shock within a standard real business cycle model is unsatisfactory. Introducing war expectations in the baseline model produces little improvement. Given the evidence on sticky wages put forward by historians, it shows that a simple DGSE model with sticky wages à la Taylor improves on the results.

Suggested Citation

  • Luca, PENSIEROSO, 2007. "The Great Depression in Belgium from a Neo-Classical Perspective," Discussion Papers (ECON - Département des Sciences Economiques) 2007025, Université catholique de Louvain, Département des Sciences Economiques.
    • Handle: RePEc:ctl:louvec:2007025
    as

    Download full text from publisher

    File URL: http://sites.uclouvain.be/econ/DP/IRES/2007-25.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Luca Pensieroso, 2011. "Real business cycle models of the Great Depression," Cliometrica, Journal of Historical Economics and Econometric History, Association Française de Cliométrie (AFC), vol. 5(2), pages 101-119, June.
    2. Fabrizio Perri & Vincenzo Quadrini, 2002. "The Great Depression in Italy: Trade Restrictions and Real Wage Rigidities," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(1), pages 128-151, January.
    3. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
    4. Carlstrom, Charles T. & Fuerst, Timothy S., 2001. "Timing and real indeterminacy in monetary models," Journal of Monetary Economics, Elsevier, vol. 47(2), pages 285-298, April.
    5. Lawrence J. Christiano & Roberto Motto & Massimo Rostagno, 2003. "The Great Depression and the Friedman-Schwartz hypothesis," Proceedings, Federal Reserve Bank of Cleveland, pages 1119-1215.
    6. Crucini, Mario J. & Kahn, James, 1996. "Tariffs and aggregate economic activity: Lessons from the Great Depression," Journal of Monetary Economics, Elsevier, vol. 38(3), pages 427-467, December.
    7. Gauti B. Eggertsson, 2008. "Great Expectations and the End of the Depression," American Economic Review, American Economic Association, vol. 98(4), pages 1476-1516, September.
    8. 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.
    9. Timothy J. Kehoe & Edward C. Prescott, 2008. "Using the general equilibrium growth model to study great depressions: a reply to Temin," Staff Report 418, Federal Reserve Bank of Minneapolis.
    10. Harold L. Cole & Ron Leung & Lee E. Ohanian, 2005. "Deflation and the international Great Depression: a productivity puzzle," Staff Report 356, Federal Reserve Bank of Minneapolis.
    11. Buyst, Erik, 1997. "New GNP Estimates for the Belgian Economy during the Interwar Period," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 43(3), pages 357-375, September.
    12. Harold L. Cole & Lee E. Ohanian, 2002. "The Great U.K. Depression: A Puzzle and Possible Resolution," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(1), pages 19-44, January.
    13. Pierre Cahuc & André Zylberberg, 2004. "Labor Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 026203316x, December.
    14. Luca Pensieroso, 2007. "Real Business Cycle Models Of The Great Depression: A Critical Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 21(1), pages 110-142, February.
    15. De Vroey Michel R & Pensieroso Luca, 2006. "Real Business Cycle Theory and the Great Depression: The Abandonment of the Abstentionist Viewpoint," The B.E. Journal of Macroeconomics, De Gruyter, vol. 6(1), pages 1-26, November.
    16. Comin, D. & Hobijn, B., 2004. "Cross-country technology adoption: making the theories face the facts," Journal of Monetary Economics, Elsevier, vol. 51(1), pages 39-83, January.
    17. Harold L. Cole & Lee E. Ohanian, 2002. "The Great U.K. Depression: A Puzzle and Possible Resolution," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(1), pages 19-44, January.
    18. 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, vol. 23(Win), pages 2-24.
    19. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
    20. Erik Buyst, 1997. "New Gnp Estimates For The Belgian Economy During The Interwar Period," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 43(3), pages 357-375, September.
    21. 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.
    22. Merz, Monika, 1995. "Search in the labor market and the real business cycle," Journal of Monetary Economics, Elsevier, vol. 36(2), pages 269-300, November.
    23. Juillard, Michel, 1996. "Dynare : a program for the resolution and simulation of dynamic models with forward variables through the use of a relaxation algorithm," CEPREMAP Working Papers (Couverture Orange) 9602, CEPREMAP.
    24. Boucekkine, Raouf, 1995. "An alternative methodology for solving nonlinear forward-looking models," Journal of Economic Dynamics and Control, Elsevier, vol. 19(4), pages 711-734, May.
    25. Timothy J. Kehoe & Edward C. Prescott, 2002. "Great Depressions of the Twentieth Century," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(1), pages 1-18, January.
    26. Pedro Amaral & James C. MacGee, 2002. "The Great Depression in Canada and the United States: A Neoclassical Perspective," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(1), pages 45-72, January.
    27. Harold L. Cole & Lee E. Ohanian, 2004. "New Deal Policies and the Persistence of the Great Depression: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, vol. 112(4), pages 779-816, August.
    28. Timothy J. Kehoe & Edward C. Prescott, 2007. "Great depressions of the twentieth century," Monograph, Federal Reserve Bank of Minneapolis, number 2007gdott.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jiang, Dou & Weder, Mark, 2021. "American business cycles 1889–1913: An accounting approach," Journal of Macroeconomics, Elsevier, vol. 67(C).
    2. W D A Bryant, 2009. "General Equilibrium:Theory and Evidence," World Scientific Books, World Scientific Publishing Co. Pte. Ltd., number 6875, December.
    3. Luca Pensieroso, 2011. "Real business cycle models of the Great Depression," Cliometrica, Journal of Historical Economics and Econometric History, Association Française de Cliométrie (AFC), vol. 5(2), pages 101-119, June.
    4. Paul Oslington, 2012. "General Equilibrium: Theory and Evidence," The Economic Record, The Economic Society of Australia, vol. 88(282), pages 446-448, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Luca Pensieroso, 2007. "Real Business Cycle Models Of The Great Depression: A Critical Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 21(1), pages 110-142, February.
    2. Luca Pensieroso & Romain Restout, 2018. "The Gold Standard and the Great Depression: a Dynamic General Equilibrium Model," LIDAM Discussion Papers IRES 2018016, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    3. Luca Pensieroso, 2011. "Real business cycle models of the Great Depression," Cliometrica, Journal of Historical Economics and Econometric History, Association Française de Cliométrie (AFC), vol. 5(2), pages 101-119, June.
    4. Cardi, Olivier & Restout, Romain, 2023. "Sectoral fiscal multipliers and technology in open economy," Journal of International Economics, Elsevier, vol. 144(C).
    5. Luca PENSIEROSO, 2010. "The Great Depression in Belgium: an Open-Economy Analysis," LIDAM Discussion Papers IRES 2010023, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    6. Jonathan Payne & Lawrence Uren, 2014. "Economic Policy and the Great Depression in a Small Open Economy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 46(2-3), pages 347-370, March.
    7. Luca Pensieroso & Romain Restout, 2021. "The Gold Standard and the International Dimension of the Great Depression," Working Papers of BETA 2021-21, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    8. Franck Portier, 2008. "Interprétation d'épisodes historiques à l'aide de modèles dynamiques stochastiques d'équilibre général," Economie & Prévision, La Documentation Française, vol. 0(4), pages 33-46.
    9. Satyajit Chatterjee & Dean Corbae, 2006. "Monetary and financial forces in the Great Depression," Working Papers 06-12, Federal Reserve Bank of Philadelphia.
    10. Hansen, G.D. & Ohanian, L.E., 2016. "Neoclassical Models in Macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 2043-2130, Elsevier.
    11. Gauti B. Eggertsson, 2012. "Was the New Deal Contractionary?," American Economic Review, American Economic Association, vol. 102(1), pages 524-555, February.
    12. Albrecht Ritschl & Monique Ebell, 2007. "Real Origins of the Great Depression: Monopoly Power, Unions and the American Business Cycle in the 1920s," 2007 Meeting Papers 712, Society for Economic Dynamics.
    13. Eduardo Sanchez Astorino & Mauro Rodrigues Junior, 2014. "The Great Depression In Brazil," Anais do XL Encontro Nacional de Economia [Proceedings of the 40th Brazilian Economics Meeting] 035, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    14. Giménez, Eduardo L. & Montero, María, 2015. "The Great Depression in Spain," Economic Modelling, Elsevier, vol. 44(C), pages 200-214.
    15. Selahattin Imrohoroglu & Ayse Imrohoroglu & Kaiji Chen, 2006. "The Japanese Saving Rate," American Economic Review, American Economic Association, vol. 96(5), pages 1850-1858, December.
    16. Ritschl, Albrecht & Ebell, Monique, 2007. "Real Origins of the Great Depression: Monopolistic Competition, Union Power, and the American Business Cycle in the 1920s," CEPR Discussion Papers 6146, C.E.P.R. Discussion Papers.
    17. Kaiji Chen & Ayse Imrohoroglu & Selahattin Imrohoroglu, 2006. "Secular Trends in U.S Saving and Consumption," Computing in Economics and Finance 2006 494, Society for Computational Economics.
    18. Kaiji Chen & Ayse Imrohoroglu & Selahattin Imrohoroglu, 2006. "Secular Movements in U.S. Saving and Consumption," 2006 Meeting Papers 154, Society for Economic Dynamics.
    19. De Vroey Michel R & Pensieroso Luca, 2006. "Real Business Cycle Theory and the Great Depression: The Abandonment of the Abstentionist Viewpoint," The B.E. Journal of Macroeconomics, De Gruyter, vol. 6(1), pages 1-26, November.
    20. Amaral, Pedro S. & MacGee, James C., 2017. "Monetary shocks and sticky wages in the U.S. great contraction: A multi-sector approach," Journal of Monetary Economics, Elsevier, vol. 92(C), pages 112-129.

    More about this item

    Keywords

    Great Depression; Belgium; sticky wages; dynamic stochastic general equilibrium;
    All these keywords.

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ctl:louvec:2007025. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Virginie LEBLANC (email available below). General contact details of provider: https://edirc.repec.org/data/iruclbe.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.