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Technological Change and the Roaring Twenties: A Neoclassical Perspective

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  • Sharon Harrison

    ()

  • Mark Weder

    ()

Abstract

In this paper, we address the causes of the Roaring Twenties in the United States. In particular, we use a version of the real business cycle model to test the hypothesis that an extraordinary pace of productivity growth was the driving factor. Our motivation comes from the abundance of evidence of signi?cant technological progress during this period, fed by innovations in manufacturing and the widespread introduction of electricity. Our estimated total factor productivity series generate arti?cial model output that shows high conformity with the data: the model economy sucessfully replicates the boom years from 1922-1929.

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Bibliographic Info

Paper provided by Centre for Dynamic Macroeconomic Analysis in its series CDMA Working Paper Series with number 200901.

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Date of creation: 15 Jan 2009
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Handle: RePEc:san:cdmawp:0901

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Keywords: Real Business Cycles; Roaring Twenties.;

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  1. Charles L. Evans, 1991. "Productivity shocks and real business cycles," Working Paper Series, Macroeconomic Issues 91-22, Federal Reserve Bank of Chicago.
  2. Greenwood, Jeremy & Hercowitz, Zvi & Huffman, Gregory W, 1988. "Investment, Capacity Utilization, and the Real Business Cycle," American Economic Review, American Economic Association, American Economic Association, vol. 78(3), pages 402-17, June.
  3. Lee E. Ohanian, 2002. "Why did productivity fall so much during the Great Depression?," Quarterly Review, Federal Reserve Bank of Minneapolis, Federal Reserve Bank of Minneapolis, issue Spr.
  4. Michael D. Bordo & Christopher J. Erceg & Charles L. Evans, 1997. "Money, sticky wages, and the Great Depression," Working Paper Series, Macroeconomic Issues WP-97-02, Federal Reserve Bank of Chicago.
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  7. Ellen R. McGrattan & Lee E. Ohanian, 2006. "Does Neoclassical Theory Account for the Effects of Big Fiscal Shocks? Evidence From World War II," NBER Working Papers 12130, National Bureau of Economic Research, Inc.
  8. Field, Alexander J., 2006. "Technological Change and U.S. Productivity Growth in the Interwar Years," The Journal of Economic History, Cambridge University Press, Cambridge University Press, vol. 66(01), pages 203-236, March.
  9. Harrison, Sharon G. & Weder, Mark, 2006. "Did sunspot forces cause the Great Depression?," Journal of Monetary Economics, Elsevier, Elsevier, vol. 53(7), pages 1327-1339, October.
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  14. 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, University of Chicago Press, vol. 112(4), pages 779-816, August.
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  16. Bresnahan, Timothy F. & Raff, Daniel M. G., 1991. "Intra-Industry Heterogeneity and the Great Depression: The American Motor Vehicles Industry, 1929–1935," The Journal of Economic History, Cambridge University Press, Cambridge University Press, vol. 51(02), pages 317-331, June.
  17. Field, Alexander J., 2009. "US economic growth in the gilded age," Journal of Macroeconomics, Elsevier, Elsevier, vol. 31(1), pages 173-190, March.
  18. Weir, David R., 1986. "The Reliability of Historical Macroeconomic Data for Comparing Cyclical Stability," The Journal of Economic History, Cambridge University Press, Cambridge University Press, vol. 46(02), pages 353-365, June.
  19. Mark Weder, 2004. "The Role of Preference Shocks and Capital Utilization in the Great Depression," CDMA Working Paper Series, Centre for Dynamic Macroeconomic Analysis 200405, Centre for Dynamic Macroeconomic Analysis.
  20. Lawrence H. Summers, 1986. "Some skeptical observations on real business cycle theory," Quarterly Review, Federal Reserve Bank of Minneapolis, Federal Reserve Bank of Minneapolis, issue Fall, pages 23-27.
  21. 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, Federal Reserve Bank of Minneapolis, issue Win, pages 2-24.
  22. Cooley, Thomas F, 1997. "Calibrated Models," Oxford Review of Economic Policy, Oxford University Press, Oxford University Press, vol. 13(3), pages 55-69, Autumn.
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