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The Impact of Cartelization, Money, and Productivity Shocks on the International Great Depression

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  • Harold L. Cole
  • Lee E. Ohanian

Abstract

This study exploits panel data from 18 countries to assess the contributions of cartelization policies, monetary shocks, and productivity shocks on macroeconomic activity during the Great Depression. To construct a parsimonious and common model framework, we use the fact that many cartel policies are observationally equivalent to a country-specific labor tax wedge. We estimate a monetary DSGE model with cartel wedges along with productivity and monetary shocks. Our main finding is that cartel policy shocks account for the bulk of the Depression in the countries that adopted significant cartel policies, including the large depressions in the U.S., Germany, Italy, and Australia, and that the estimated cartel policy shocks plausibly coincide with the actual evolution of policies in these countries. In contrast, cartel policy shocks in the countries that did not significantly change policies were small and account for little of their Depressions.

Suggested Citation

  • Harold L. Cole & Lee E. Ohanian, 2013. "The Impact of Cartelization, Money, and Productivity Shocks on the International Great Depression," NBER Working Papers 18823, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:18823
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    1. 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.
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    12. Jonas D.M. Fisher & Andreas Hornstein, 2002. "The Role of Real Wages, Productivity, and Fiscal Policy in Germany's Great Depression 1928-37," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(1), pages 100-127, January.
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    14. Choudhri, Ehsan U & Kochin, Levis A, 1980. "The Exchange Rate and the International Transmission of Business Cycle Disturbances: Some Evidence from the Great Depression," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 12(4), pages 565-574, November.
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    1. The Impact of Cartelization, Money, and Productivity Shocks on the International Great Depression
      by Christian Zimmermann in NEP-DGE blog on 2013-03-18 23:53:57

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    Cited by:

    1. Klein, Alexander & Otsuy, Keisuke, 2013. "Efficiency, Distortions and Factor Utilization during the Interwar Period," CAGE Online Working Paper Series 147, Competitive Advantage in the Global Economy (CAGE).
    2. Alex Klein & Keisuke Otsu, 2013. "Efficiency, Distortions and Factor Utilization during the Interwar Period," Studies in Economics 1317, School of Economics, University of Kent.
    3. Koyama, Mark & Johnson, Blake, 2015. "Monetary stability and the rule of law," Journal of Financial Stability, Elsevier, vol. 17(C), pages 46-58.

    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • N12 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - U.S.; Canada: 1913-

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