DP3716 Some Observations on the Great Depression in Germany
Author(s): | Mark Weder |
Publication Date: | January 2003 |
Keyword(s): | applied dynamic General Equilibrium, demand shocks, germany, great depression |
JEL(s): | E32, N14 |
Programme Areas: | International Macroeconomics |
Link to this Page: | cepr.org/active/publications/discussion_papers/dp.php?dpno=3716 |
This Paper evaluates the role of the demand side during the Great Depression in Germany. From Euler equation residuals we are able to identify a series of contractionary demand shocks that pounded the German economy from 1929-32. We apply the detrimental preference innovations to a dynamic general equilibrium model and find that size and 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 significant effects of Nazi economic policy.