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Was the New Deal expansionary?

Author

Listed:
  • Ji, Yangyang
  • Xiao, Wei

Abstract

When wages are sticky and the interest rate hits the zero lower bound (ZLB), the expansionary effect of New Deal policies is drastically reduced. If the duration of the policies mismatches that of the ZLB, the effect can be contractionary.

Suggested Citation

  • Ji, Yangyang & Xiao, Wei, 2019. "Was the New Deal expansionary?," Economics Letters, Elsevier, vol. 184(C).
    • Handle: RePEc:eee:ecolet:v:184:y:2019:i:c:s016517651930312x
    DOI: 10.1016/j.econlet.2019.108634
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    References listed on IDEAS

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    1. Ben S. Bernanke & James Powell, 1986. "The Cyclical Behavior of Industrial Labor Markets: A Comparison of the Prewar and Postwar Eras," NBER Chapters, in: The American Business Cycle: Continuity and Change, pages 583-638, National Bureau of Economic Research, Inc.
    2. Rose, Jonathan D., 2010. "Hoover's Truce: Wage Rigidity in the Onset of the Great Depression," The Journal of Economic History, Cambridge University Press, vol. 70(4), pages 843-870, December.
    3. Gauti B. Eggertsson, 2012. "Was the New Deal Contractionary?," American Economic Review, American Economic Association, vol. 102(1), pages 524-555, February.
    4. Ivan Werning, 2011. "Managing a Liquidity Trap: Monetary and Fiscal Policy," 2011 Meeting Papers 1435, Society for Economic Dynamics.
    5. Hanes, Christopher, 1996. "Changes in the Cyclical Behavior of Real Wage Rates, 1870–1990," The Journal of Economic History, Cambridge University Press, vol. 56(4), pages 837-861, December.
    6. Susanto Basu & Alan M. Taylor, 1999. "Business Cycles in International Historical Perspective," Journal of Economic Perspectives, American Economic Association, vol. 13(2), pages 45-68, Spring.
    7. Gauti B. Eggertsson & Paul Krugman, 2012. "Debt, Deleveraging, and the Liquidity Trap: A Fisher-Minsky-Koo Approach," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 127(3), pages 1469-1513.
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    More about this item

    Keywords

    New deal; Sticky wages; Zero lower bound;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • N12 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - U.S.; Canada: 1913-

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