Discussion paper
DP3716 Some Observations on the Great Depression in Germany
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.
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