[Re-Examining the Contributions of Money and Banking Shocks to the U.S. Great Depression]: Comment

Abstract

quick deflation. Real interest rates swung wildly, with the (annualized) ex post short-term real interest rate fluctuating from roughly -20% in the first half of 1920 to 45-50% in the second half of that year. In such circumstances, the usual difficulties of disentangling the effects of shifts in inflation expectations on nominal rates from the effects of changing real rates and risk premia are greatly exacerbated.

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

“…In contrast, Cole and Ohanian (2001) employ a two-sector model to evaluate the impact of high real wages, and conclude that sticky wages account for less than a sixth of the fall in output. However, Gertler (2001) and Bordo, Erceg, and Evans (2001) argue that both the data and the model approach raise questions as to the robustness of Cole and Ohanian (2001) findings.…”

“…However, our framework addresses the key technical criticisms raised by Gertler (2001) and Bordo, Erceg, and Evans (2001) of the Cole and Ohanian (2001) exercise. First, our calibration results in a sticky-wage sector roughly twice as large as in Cole and Ohanian (2001).…”

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

“…Our two-sector framework differs fromCole and Ohanian (2001) in several respects which address the key criticisms ofGertler (2001) andBordo, Erceg, and Evans (2001). First, our calibration results in a sticky wage sector roughly twice as large as their benchmark.…”

“…The use of quantitative DSGE models to examine Great Depressions is relatively recent. The papers inKehoe and Prescott (2007) examine the experiences of a number of countries.4 Since our model also abstracts from any underlying productivity growth, these differences address the key criticisms ofGertler (2001) andBordo, Erceg, and Evans (2001) ofCole and Ohanian (2001).…”