Arbeitspapier

Was the New Deal contractionary?

Can government policies that increase the monopoly power of firms and the militancy of unions increase output? This paper studies this question in a dynamic general equilibrium model with nominal frictions and shows that these policies are expansionary when certain “emergency” conditions apply. I argue that these emergency conditions— zero interest rates and deflation—were satisfied during the Great Depression in the United States. Therefore, the New Deal, which facilitated monopolies and union militancy, was expansionary, according to the model. This conclusion is contrary to the one reached by Cole and Ohanian (2004), who argue that the New Deal was contractionary. The main reason for this divergence is that the current model incorporates nominal frictions so that inflation expectations play a central role in the analysis. The New Deal has a strong effect on inflation expectations in the model, changing excessive deflation to modest inflation, thereby lowering real interest rates and stimulating spending.

Sprache
Englisch

Erschienen in
Series: Staff Report ; No. 264

Klassifikation
Wirtschaft
Monetary Policy
Fiscal Policy
Studies of Particular Policy Episodes
Economic History: Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations: U.S.; Canada: 1913-
Thema
Great Depression, New Deal, National Industrial Recovery Act, zero interest rates, deflation
Marktmacht
Monopol
Gewerkschaft
Dynamisches Gleichgewicht
Wirtschaftspolitik
Wirtschaftskrise
USA
Verhandlungsmacht

Ereignis
Geistige Schöpfung
(wer)
Eggertsson, Gauti B.
Ereignis
Veröffentlichung
(wer)
Federal Reserve Bank of New York
(wo)
New York, NY
(wann)
2006

Handle
Letzte Aktualisierung
10.03.2025, 11:43 MEZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • Eggertsson, Gauti B.
  • Federal Reserve Bank of New York

Entstanden

  • 2006

Ähnliche Objekte (12)