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Unemployment, Inflation, and Wages in the American Depression: Are There Lessons for Europe?

Listed author(s):
  • Ben Bernanke
  • Martin Parkinson

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.

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Date of creation: Feb 1989
Publication status: published as "Unemployment, Inflation, and Wages in the American Depression: Are There Lessons for Europe?" American Economic Review, papers and proceed-ings, May 1989, vol. 79, no.2 pp. 210-214, with Martin Parkinson
Handle: RePEc:nbr:nberwo:2862
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  1. Peter Temin & Barrie A. Wigmore, 1988. "The End of One Big Deflation," Working papers 503, Massachusetts Institute of Technology (MIT), Department of Economics.
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