scholarly journals Did Technology Shocks Drive the Great Depression? Explaining Cyclical Productivity Movements in U.S. Manufacturing, 1919–1939

2011 ◽  
Vol 71 (4) ◽  
pp. 827-858 ◽  
Author(s):  
ROBERT INKLAAR ◽  
HERMAN DE JONG ◽  
REITZE GOUMA
Keyword(s):  
Business Cycle ◽  
Great Depression ◽  
Returns To Scale ◽  
The United States ◽  
Increasing Returns ◽  
Real Business Cycle ◽  
Technology Shocks ◽  
Business Cycle Theory ◽  
Increasing Returns To Scale ◽  
The Great Depression

Technology shocks and declining productivity have been advanced as important factors driving the Great Depression in the United States, based on real business cycle theory. We estimate an improved measure of technology for interwar manufacturing, using data from the U.S. census reports. There is clear evidence of increasing returns to scale and we find no statistical proof that technology shocks led to changes in hours worked or other inputs. This contradicts a key prediction of real business cycle theory. We find that increasing returns to scale are not due to market power but to labor and capital hoarding.

Technology Shocks and the Great Depression

2016 ◽  
Vol 76 (3) ◽  
pp. 909-933 ◽  
Author(s):  
Shingo Watanabe
Keyword(s):  
Business Cycles ◽  
Business Cycle ◽  
Great Depression ◽  
Imperfect Competition ◽  
Real Business Cycle ◽  
Technology Shocks ◽  
The Great Depression ◽  
Large Fluctuations ◽  
Technology Growth

Standard productivity measures indicate large fluctuations in technology during the Great Depression. This article's historical technology series (1892–1966), controlled for aggregation effects, varying input utilization, non-constant returns, and imperfect competition, does not indicate technology regress such that could trigger the downturn. In contrast, technology improvements in the recovery were so rapid that, over the whole Great Depression period, technology growth was highest among pre-WWII decades. This article also finds that output changed little and inputs fell when technology improved in the pre-WWII period. Real-business-cycle models have difficulty in explaining pre-WWII business cycles characterized by such responses.

scholarly journals Evolution of Modern Business Cycle Models: Accounting for the Great Recession

2018 ◽  
Vol 32 (3) ◽  
pp. 141-166 ◽  
Author(s):  
Patrick J. Kehoe ◽  
Virgiliu Midrigan ◽  
Elena Pastorino
Keyword(s):  
Business Cycle ◽  
Great Recession ◽  
The United States ◽  
Dsge Models ◽  
Real Business Cycle ◽  
Business Cycle Theory ◽  
The Great Recession ◽  
Modern Business ◽  
Dynamic Stochastic ◽  
The Rich

Modern business cycle theory focuses on the study of dynamic stochastic general equilibrium (DSGE) models that generate aggregate fluctuations similar to those experienced by actual economies. We discuss how these modern business cycle models have evolved across three generations, from their roots in the early real business cycle models of the late 1970s through the turmoil of the Great Recession four decades later. The first generation models were real (that is, without a monetary sector) business cycle models that primarily explored whether a small number of shocks, often one or two, could generate fluctuations similar to those observed in aggregate variables such as output, consumption, investment, and hours. These basic models disciplined their key parameters with micro evidence and were remarkably successful in matching these aggregate variables. A second generation of these models incorporated frictions such as sticky prices and wages; these models were primarily developed to be used in central banks for short-term forecasting purposes and for performing counterfactual policy experiments. A third generation of business cycle models incorporate the rich heterogeneity of patterns from the micro data. A defining characteristic of these models is not the heterogeneity among model agents they accommodate nor the micro-level evidence they rely on (although both are common), but rather the insistence that any new parameters or feature included be explicitly disciplined by direct evidence. We show how two versions of this latest generation of modern business cycle models, which are real business cycle models with frictions in labor and financial markets, can account, respectively, for the aggregate and the cross-regional fluctuations observed in the United States during the Great Recession.

Business Cycles and Current Economic Analysis

2021 ◽  
Vol 28 (3) ◽  
pp. 577-594
Author(s):  
Estela Bee Dagum
Keyword(s):  
Economic Analysis ◽  
Business Cycles ◽  
Business Cycle ◽  
The Other ◽  
Real Business Cycle ◽  
Business Cycle Theory ◽  
Economic Cycles ◽  
The Great Depression ◽  
Definition Of ◽  
Nominal Shocks

This is a brief introduction to the special issue on “New Developments in Modelling and Estimation of Economic Cycles” . The concept and definition of economic and business cycles are discussed together with two main schools of thought, the Keynesian and the neoclassical. Until the Keynesian revolution in mainstream economics in the wake of the Great Depression, classical and neoclassical explanations were the mainstream explanation of economic cycles; following the Keynesian revolution, neoclassical macroeconomics was largely rejected. There has been some resurgence of neoclassical approaches in the form of real business cycle (RBC) theory. Real business cycle theory is a class of macroeconomic model in which business cycle fluctuations to a large extent can be accounted for by real (in contrast to nominal) shocks. In a broad sense , there have been two ways by which economic and business cycles have been studied, one analyzing complete cycles and the other, studying the behavior of the economic indicators during incomplete phases by comparing current contractions or expansions whith corresponding phases in the past in order to assess current economic conditions. Two different methodologies have been applied for current economic analysis, the parametric one, that makes use of filters based on models, such as ARIMA and State Space models , and the other based on nonparametric digital filtering. Some of the invited papers of this issue deal with this second approach.

scholarly journals Endogenous Business Cycles and the Dynamics of Output, Hours, and Consumption

2000 ◽  
Vol 90 (5) ◽  
pp. 1136-1159 ◽  
Author(s):  
Stephanie Schmitt-Grohé
Keyword(s):  
Business Cycles ◽  
Business Cycle ◽  
Returns To Scale ◽  
Real Business Cycle ◽  
Cycle Model ◽  
Increasing Returns To Scale ◽  
Endogenous Business Cycles ◽  
Business Cycle Model ◽  
The Business Cycle ◽  
Dynamic Element

This paper studies the business-cycle fluctuations predicted by a two-sector endogenous-business-cycle model with sector-specific external increasing returns to scale. It focuses on aspects of actual fluctuations that have been identified both as defining features of business cycles and as ones standard real-business-cycle models cannot explain. For empirically realistic calibrations of the degree of returns to scale, the results suggest that endogenous fluctuations do not provide the dynamic element that is missing in existing real-business-cycle models. (JEL E32)

Real Business Cycle Views of the Great Depression and Recent Events: A Review of Timothy J. Kehoe and Edward C. Prescott's Great Depressions of the Twentieth Century

2008 ◽  
Vol 46 (3) ◽  
pp. 669-684 ◽  
Author(s):  
Peter Temin
Keyword(s):  
Economic Growth ◽  
Business Cycle ◽  
Great Depression ◽  
Real Business Cycle ◽  
Closed Economy ◽  
Tfp Growth ◽  
The Great Depression ◽  
Short Run ◽  
Definition Of ◽  
Almost All

This book collects essays, most of which were published earlier, into an advertisement for real business cycle (RBC) analysis. Half of the essays discuss the Great Depression; half discuss events of the 1980s and 1990s. They all use the general equilibrium model of economic growth to analyze short-run fluctuations in the rate of economic growth of various countries. I find that the use of closed economy models without frictions is not useful for the analysis of short-run variations in the rate of economic growth. Almost all of these essays end by claiming that variations in the rate of GDP growth were due to changes in the rate of total factor productivity (TFP) growth. They do not provide any explanation for fluctuations in the rate of TFP growth, leaving the reader no closer to understanding these periods of depression and slow growth. I discuss in turn the essays on the Great Depression, the essays on more recent fluctuations, and the definition of “great depressions” used in this volume.

Austrian Business Cycle Theory

2015 ◽  
pp. 185-212
Author(s):  
Andrew Young
Keyword(s):  
Financial Crisis ◽  
Business Cycle ◽  
Housing Market ◽  
Great Depression ◽  
Business Cycle Theory ◽  
Austrian Business Cycle Theory ◽  
The Great Depression ◽  
Continuous Output ◽  
Austrian Business Cycle ◽  
Von Mises

Austrian business cycle theory (ABCT) is a body of hypotheses embodying particularly Austrian insights and assumptions. The canonical variant associated with Ludwig von Mises and Friedrich A. Hayek is particularly well suited to the Great Depression. However, it is an inadequate account of the recent US recession and financial crisis. This chapter develops a suitable ABCT variant that explicitly incorporates not only the economy’s time structure of production but also (1) its structure of consumption and (2) its risk structure. The continuous input–continuous output nature of the housing market is highlighted, along with the Treasury and the Federal Reserve’s roles in externalizing the risk associated with government-sponsored entities’ (GSEs’) debt. The chapter then extends Roger Garrison’s graphical framework to illustrate this ABCT variant.

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