The Impact of Cartelization, Money, and Productivity Shocks on the International Great Depression

39 Pages Posted: 22 Feb 2013 Last revised: 8 Jun 2023

See all articles by Harold L. Cole

Harold L. Cole

University of Pennsylvania - Department of Economics; National Bureau of Economic Research (NBER)

Lee E. Ohanian

University of California, Los Angeles (UCLA) - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: February 2013

Abstract

This study exploits panel data from 18 countries to assess the contributions of cartelization policies, monetary shocks, and productivity shocks on macroeconomic activity during the Great Depression. To construct a parsimonious and common model framework, we use the fact that many cartel policies are observationally equivalent to a country-specific labor tax wedge. We estimate a monetary DSGE model with cartel wedges along with productivity and monetary shocks. Our main finding is that cartel policy shocks account for the bulk of the Depression in the countries that adopted significant cartel policies, including the large depressions in the U.S., Germany, Italy, and Australia, and that the estimated cartel policy shocks plausibly coincide with the actual evolution of policies in these countries. In contrast, cartel policy shocks in the countries that did not significantly change policies were small and account for little of their Depressions.

Suggested Citation

Cole, Harold L. and Ohanian, Lee E., The Impact of Cartelization, Money, and Productivity Shocks on the International Great Depression (February 2013). NBER Working Paper No. w18823, Available at SSRN: https://ssrn.com/abstract=2222510

Harold L. Cole (Contact Author)

University of Pennsylvania - Department of Economics ( email )

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Lee E. Ohanian

University of California, Los Angeles (UCLA) - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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