Deflation and the International Great Depression: A Productivity Puzzle
- Topics:
- Deflation
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Overview: This paper presents a dynamic, stochastic general equilibrium study of the causes of the international 'Great Depression'. It uses a fully articulated model to assess the relative contributions of deflation/monetary shocks, which are the most commonly, cited shocks for the Depression, and productivity shocks. It finds that productivity is the dominant shock, accounting for about 2/3 of the Depression, with the monetary shock accounting for about 1/3. The finding that a persistent productivity shock is the key factor that stands in contrast to the conventional view that a continuing sequence of unexpected deflation shocks was the major cause of the Depression.
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Format: PDF | Size: 495KB | Date: Mar 2005 | Pages: 68
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