The Great Depression in Canada and the United States: A Neoclassical Perspective
James C. MacGee
Canada suffered a major depression from 1929 to 1939. In terms of output, it was similar to the Great Depression in the United States. However, total factor productivity (TFP) in Canada did not recover relative to trend, the in the United States TFP had revered by 1937. We find that the neoclassical growth model, with TFP treated as exogenous, can account for over half of the decline in output relative to trend in Canada. In contrast, we find that conventional explanations for the Great Depression - monetary shocks, terms of trade shocks and labor market and competition policies - do not work for Canada. (Copyright: Elsevier)
Great Depression, Canada, productivity, terms of trade, deflation
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