Monetary shocks and sticky wages in the U.S. great contraction: A multi-sector approach

Pedro Amaral and James (Jim) MacGee ()

Journal of Monetary Economics, 2017, vol. 92, issue C, 112-129

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 little increase in the economy-wide real wage over 1929–33, although real wages rose significantly in some industries. In the context of a two-sector model with intermediates and nominal wage rigidities in one sector, contractionary monetary shocks account for only a third of the fall in GDP. Intermediate linkages play an important role, as the output decline without intermediates is almost a third larger at the trough. The role of nominal wage rigidities beyond their interaction with monetary shocks is limited.

Keywords: Great depression; Sectoral models; Sticky wages (search for similar items in EconPapers)
JEL-codes: E20 E30 E50 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:92:y:2017:i:c:p:112-129

DOI: 10.1016/j.jmoneco.2017.08.003

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