Cole and Ohanian.

• Position: Economists - Brief Article

Using general equilibrium models, Cole and Ohanian evaluate the contribution of deflationary money shocks (operating through imperfectly flexible wages in certain sectors) and financial intermediation shocks (operating through bank failures) to the Great Depression. Specifically, they ask whether these shocks could reasonably have driven down output per adult nearly 40 percent relative to trend between 1929 and 33. They find that money shocks and banking shocks...