The Great Demand Depression

Mark Weder

No 3067, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This Paper entertains the notion that disturbances on the demand side play a central role in our understanding of the Great Depression. In fact, from Euler equation residuals I am able to identify a series of unusually large negative demand shocks that appeared to have hit the US economy during the 1930s. I apply these measured demand shocks to a dynamic general equilibrium model and find that size and sequence of shocks can generate a pattern of the model economy that is not unlike data. The model is able to account for the lion?s share of the decline in economic activity and is able to exaggerate realistic persistence.

Keywords: Great depression; Demand shocks; Dynamic general equilibrium (search for similar items in EconPapers)
JEL-codes: E32 N12 (search for similar items in EconPapers)
Date: 2001-11
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Citations: View citations in EconPapers (12)

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