In this paper, we consider whether there are lessons to be drawn from the experience of the American economy during the 1930's for the current European situation. The comparison reveals some important differences: In particular, the persistence of American unemployment in the 1930's reflected to a much greater degree a sequence of large destabilizing shocks, and much less a low-level equilibrium trap, than does modern European unemployment. The self-correcting tendencies of the 1930's U.S. economy were probably much stronger than is generally acknowledged. However, the experience of the Depression era confirms the modern observation that the level of unemployment does not much affect the rate of inflation--an observation that, we argue, is consistent with macro theory. The Depression experience also supports the impression that political factors are important in real wage determination.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
2862.
Length: Date of creation: Feb 1989 Date of revision: Handle: RePEc:nbr:nberwo:2862
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Blanchard, Olivier J & Cottarelli, Carlo & Spilimbergo, Antonio & Symansky, Steven, 2009.
"Fiscal Policy for the Crisis,"
CEPR Discussion Papers
7130, C.E.P.R. Discussion Papers.
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Antonio Spilimbergo & Steve Symansky & Olivier Blanchard & Carlo Cottarelli, 2009.
"Fiscal Policy For The Crisis,"
CESifo Forum,
Ifo Institute for Economic Research at the University of Munich, vol. 10(2), pages 26-32, 07.
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