TY  - JOUR
AU  - Bernanke,Ben S.
AU  - Carey,Kevin
TI  - Nominal Wage Stickiness and Aggregate Supply in the Great Depression
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 5439
PY  - 1996
Y2  - January 1996
UR  - http://www.nber.org/papers/w5439
L1  - http://www.nber.org/papers/w5439.pdf
N1  - Author contact info:
Ben S. Bernanke
E-Mail: Rita.C.Proctor@frb.gov

Kevin Carey
The Education Trust
1250 H Street, NW, Suite 700
Washington, DC  20005
Tel: 202-293-1217
E-Mail: kcarey@edtrust.org
AB  - Building on earlier work by Eichengreen and Sachs, we use data for 22 countries to study the role of wage stickiness in propagating the Great Depression.  Recent research suggests that monetary shocks, transmitted internationally by the gold standard, were a major cause of the Depression.  Accordingly, we use money supplies and other aggregate demand shifters as instruments to identify aggregate supply relationships.  We find that nominal wages adjusted quite slowly to falling prices, and that the resulting increases in real wages depressed output.  These findings leave open the question of why wages were so inertial in the face of extreme labor market conditions.
ER  -