IDEAS home Printed from https://ideas.repec.org/a/bla/germec/v7y2006i1p113-133.html
   My bibliography  Save this article

Some Observations on the Great Depression in Germany

Author

Listed:
  • Mark Weder

Abstract

. This paper evaluates the role of preference shocks during the Great Depression in Germany. From Euler equation residuals, I am able to identify a series of contractionary shocks that struck the German economy from 1929 to 1932. I apply the sequence of these taste innovations to a dynamic general‐equilibrium model and find that the size and the order of shocks can generate a pattern that can explain the lion's share of the decline in economic activity. The artificial economy also predicts a swift recovery after 1932, thereby questioning any significant effects of Nazi economic policy.

Suggested Citation

  • Mark Weder, 2006. "Some Observations on the Great Depression in Germany," German Economic Review, Verein für Socialpolitik, vol. 7(1), pages 113-133, February.
    • Handle: RePEc:bla:germec:v:7:y:2006:i:1:p:113-133
    DOI: 10.1111/j.1468-0475.2006.00149.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1468-0475.2006.00149.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1468-0475.2006.00149.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Blanchard, Olivier Jean & Quah, Danny, 1989. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," American Economic Review, American Economic Association, vol. 79(4), pages 655-673, September.
    2. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2002. "Accounting for the Great Depression (technical appendix)," Working Papers 619, Federal Reserve Bank of Minneapolis.
    3. Peter Temin, 1971. "The Beginning of the Depression in Germany," Economic History Review, Economic History Society, vol. 24(2), pages 240-248, May.
    4. Benhabib, Jess & Wen, Yi, 2004. "Indeterminacy, aggregate demand, and the real business cycle," Journal of Monetary Economics, Elsevier, vol. 51(3), pages 503-530, April.
    5. Robert E. Hall, 1986. "The Role of Consumption in Economic Fluctuations," NBER Chapters, in: The American Business Cycle: Continuity and Change, pages 237-266, National Bureau of Economic Research, Inc.
    6. Jordi Galí & Mark Gertler & J. David López-Salido, 2007. "Markups, Gaps, and the Welfare Costs of Business Fluctuations," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 44-59, November.
    7. Robert J. Gordon, 1986. "The American Business Cycle: Continuity and Change," NBER Books, National Bureau of Economic Research, Inc, number gord86-1.
    8. Fair, Ray C & Shiller, Robert J, 1990. "Comparing Information in Forecasts from Econometric Models," American Economic Review, American Economic Association, vol. 80(3), pages 375-389, June.
    9. Burnside, Craig & Eichenbaum, Martin, 1996. "Factor-Hoarding and the Propagation of Business-Cycle Shocks," American Economic Review, American Economic Association, vol. 86(5), pages 1154-1174, December.
    10. Jordi Gali & Pau Rabanal, 2004. "Technology Shocks and Aggregate Fluctuations: How Well Does the RBS Model Fit Postwar U.S. Data?," NBER Working Papers 10636, National Bureau of Economic Research, Inc.
    11. Ritschl Albrecht & Spoerer Mark, 1997. "Das Bruttosozialprodukt in Deutschland nach den amtlichen Volkseinkommens- und Sozialproduktsstatistiken 1901-1995," Jahrbuch für Wirtschaftsgeschichte / Economic History Yearbook, De Gruyter, vol. 38(2), pages 27-54, December.
    12. Lee E. Ohanian, 2002. "Why did productivity fall so much during the Great Depression?," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 26(Spr).
    13. Harald Uhlig, 2004. "What moves GNP?," Econometric Society 2004 North American Winter Meetings 636, Econometric Society.
    14. Neville Francis & Valerie A. Ramey, 2002. "Is the Technology-Driven Real Business Cycle Hypothesis Dead?," NBER Working Papers 8726, National Bureau of Economic Research, Inc.
    15. Salyer, Kevin D., 1995. "The macroeconomics of self-fulfilling prophecies A review essay," Journal of Monetary Economics, Elsevier, vol. 35(1), pages 215-242, February.
    16. Holland, Allison & Scott, Andrew, 1998. "The Determinants of UK Business Cycles," Economic Journal, Royal Economic Society, vol. 108(449), pages 1067-1092, July.
    17. Hall, Robert E, 1997. "Macroeconomic Fluctuations and the Allocation of Time," Journal of Labor Economics, University of Chicago Press, vol. 15(1), pages 223-250, January.
    18. Parkin, Michael, 1988. "A method for determining whether parameters in aggregative models are structural," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 29(1), pages 215-252, January.
    19. Christopher J. Erceg & Michael D. Bordo & Charles L. Evans, 2000. "Money, Sticky Wages, and the Great Depression," American Economic Review, American Economic Association, vol. 90(5), pages 1447-1463, December.
    20. Bencivenga, Valerie R, 1992. "An Econometric Study of Hours and Output Variation with Preference Shocks," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(2), pages 449-471, May.
    21. Jonas D.M. Fisher & Andreas Hornstein, 2002. "The Role of Real Wages, Productivity, and Fiscal Policy in Germany's Great Depression 1928-37," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(1), pages 100-127, January.
    22. Jonas D.M. Fisher & Andreas Hornstein, 2002. "The Role of Real Wages, Productivity, and Fiscal Policy in Germany's Great Depression 1928-37," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(1), pages 100-127, January.
    23. Martin S. Eichenbaum & Lars Peter Hansen & Kenneth J. Singleton, 1988. "A Time Series Analysis of Representative Agent Models of Consumption and Leisure Choice Under Uncertainty," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 103(1), pages 51-78.
    24. Greenwood, Jeremy & Hercowitz, Zvi & Huffman, Gregory W, 1988. "Investment, Capacity Utilization, and the Real Business Cycle," American Economic Review, American Economic Association, vol. 78(3), pages 402-417, June.
    25. Wen, Yi, 2002. "Fickle Consumers versus Random Technology: Explaining Domestic and International Comovements," Working Papers 02-01, Cornell University, Center for Analytic Economics.
    26. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2003. "Accounting for the Great Depression," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 27(Spr), pages 2-8.
    27. Robert J. Gordon, 1986. "Front matter, The American Business Cycle. Continuity and Change," NBER Chapters, in: The American Business Cycle: Continuity and Change, pages -15, National Bureau of Economic Research, Inc.
    28. Casey B. Mulligan, 2002. "A Dual Method of Empirically Evaluating Dynamic Competitive Equilibrium Models with Market Distortions, Applied to the Great Depression & World War II," NBER Working Papers 8775, National Bureau of Economic Research, Inc.
    29. Marianne Baxter & Robert G. King, 1991. "Productive externalities and business cycles," Discussion Paper / Institute for Empirical Macroeconomics 53, Federal Reserve Bank of Minneapolis.
    30. John H. Cochrane, 1994. "Permanent and Transitory Components of GNP and Stock Prices," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(1), pages 241-265.
    31. Harold L. Cole & Lee E. Ohanian, 1999. "The Great Depression in the United States from a neoclassical perspective," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 23(Win), pages 2-24.
    32. Weder, Mark, 2001. "The great demand depression," SFB 373 Discussion Papers 2001,53, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    33. Susanto Basu & Miles S. Kimball, 1997. "Cyclical Productivity with Unobserved Input Variation," NBER Working Papers 5915, National Bureau of Economic Research, Inc.
    34. Robert E. Hall, 1987. "Consumption," NBER Working Papers 2265, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Maurer, Stephan E., 2018. "Voting Behavior and Public Employment in Nazi Germany," The Journal of Economic History, Cambridge University Press, vol. 78(1), pages 1-39, March.
    2. Mark Weder, 2006. "A heliocentric journey into Germany's Great Depression," Oxford Economic Papers, Oxford University Press, vol. 58(2), pages 288-316, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Weder, Mark, 2001. "The Great Demand Depression," CEPR Discussion Papers 3067, C.E.P.R. Discussion Papers.
    2. Mark Weder, 2006. "The Role Of Preference Shocks And Capital Utilization In The Great Depression," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(4), pages 1247-1268, November.
    3. repec:bla:germec:v:7:y:2006:i::p:113-133 is not listed on IDEAS
    4. Harrison, Sharon G. & Weder, Mark, 2006. "Did sunspot forces cause the Great Depression?," Journal of Monetary Economics, Elsevier, vol. 53(7), pages 1327-1339, October.
    5. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2007. "Business Cycle Accounting," Econometrica, Econometric Society, vol. 75(3), pages 781-836, May.
    6. Mark Weder, 2006. "A heliocentric journey into Germany's Great Depression," Oxford Economic Papers, Oxford University Press, vol. 58(2), pages 288-316, April.
    7. Jordi Galí & Mark Gertler & J. David López-Salido, 2007. "Markups, Gaps, and the Welfare Costs of Business Fluctuations," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 44-59, November.
    8. Lawrence J. Christiano & Roberto Motto & Massimo Rostagno, 2003. "The Great Depression and the Friedman-Schwartz hypothesis," Proceedings, Federal Reserve Bank of Cleveland, pages 1119-1215.
    9. Hall, Robert E, 1997. "Macroeconomic Fluctuations and the Allocation of Time," Journal of Labor Economics, University of Chicago Press, vol. 15(1), pages 223-250, January.
    10. Peter Ireland & Scott Schuh, 2008. "Productivity and U.S. Macroeconomic Performance: Interpreting the Past and Predicting the Future with a Two-Sector Real Business Cycle Model," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(3), pages 473-492, July.
    11. Nakajima, Tomoyuki, 2005. "A business cycle model with variable capacity utilization and demand disturbances," European Economic Review, Elsevier, vol. 49(5), pages 1331-1360, July.
    12. Peter N. Ireland, 2009. "On the Welfare Cost of Inflation and the Recent Behavior of Money Demand," American Economic Review, American Economic Association, vol. 99(3), pages 1040-1052, June.
    13. Ruy Lama, 2011. "Accounting for Output Drops in Latin America," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 14(2), pages 295-316, April.
    14. Wen, Yi, 2007. "By force of demand: Explaining international comovements," Journal of Economic Dynamics and Control, Elsevier, vol. 31(1), pages 1-23, January.
    15. Blankenau, William & Ayhan Kose, M. & Yi, Kei-Mu, 2001. "Can world real interest rates explain business cycles in a small open economy?," Journal of Economic Dynamics and Control, Elsevier, vol. 25(6-7), pages 867-889, June.
    16. Clarke, Andrew J. & Johri, Alok, 2009. "Procyclical Solow Residuals Without Technology Shocks," Macroeconomic Dynamics, Cambridge University Press, vol. 13(3), pages 366-389, June.
    17. Chang, Yongsung & Schorfheide, Frank, 2003. "Labor-supply shifts and economic fluctuations," Journal of Monetary Economics, Elsevier, vol. 50(8), pages 1751-1768, November.
    18. Hevia, Constantino, 2014. "Emerging market fluctuations: What makes the difference?," Journal of International Economics, Elsevier, vol. 94(1), pages 33-49.
    19. Jones, John Bailey, 2002. "Has fiscal policy helped stabilize the postwar U.S. economy?," Journal of Monetary Economics, Elsevier, vol. 49(4), pages 709-746, May.
    20. Mark Weder, 2010. "Economic Crisis and Economic Theory," The Economic Record, The Economic Society of Australia, vol. 86(s1), pages 7-12, September.
    21. Hirata, Hideaki, 2014. "Preference shocks, international frictions, and international business cycles," Journal of Asian Economics, Elsevier, vol. 34(C), pages 92-104.

    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:germec:v:7:y:2006:i:1:p:113-133. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/vfsocea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.