Re-Examining the Role of Sticky Wages in the U.S. Great Contraction: A Multisectoral Approach

Pedro Amaral and James (Jim) MacGee ()

No 911, Working Papers (Old Series) from Federal Reserve Bank of Cleveland

Abstract: We quantify the role of contractionary monetary shocks and nominal wage rigidities in the U.S. Great Contraction. In contrast to conventional wisdom, we find that the average economy-wide real wage varied little over 1929?33, although real wages rose significantly in some industries. Using a two-sector model with intermediates and nominal wage rigidities in one sector, we find that contractionary monetary shocks can account for only a quarter of the fall in GDP, and as little as a fifth at the trough. Intermediate linkages play a key role, as the output decline in our benchmark is roughly half as large as in a two-sector model without intermediates.

Keywords: Depressions; Wages; Prices (search for similar items in EconPapers)
JEL-codes: E20 E30 E50 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2009
New Economics Papers: this item is included in nep-cba, nep-dge, nep-fdg, nep-his, nep-mac and nep-mic
Note: A multi-sectoral approach to the U.S. Great Depression (2009)
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Related works:
Working Paper: Re-Examining the Role of Sticky Wages in the U.S. Great Contraction: A Multi-sector Approach (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedcwp:0911

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