Peterson Institute for International Economics
Institutional Affiliation: Peterson Institute for International Economics
Information about this author at RePEc
NBER Working Papers and Publications
|March 2016||Supply-Side Policies in the Depression: Evidence from France|
with Joshua K. Hausman, Johannes F. Wieland: w22140
The effects of supply-side policies in depressed economies are controversial. We shed light on this debate using evidence from France in the 1930s. In 1936, France departed from the gold standard and implemented mandatory wage increases and hours restrictions. Deflation ended but output stagnated. We present time-series and cross-sectional evidence that these supply-side policies, in particular the 40-hour law, contributed to French stagflation. These results are inconsistent both with the standard one-sector new Keynesian model and with a medium scale, multi-sector model calibrated to match our cross-sectional estimates. We conclude that the new Keynesian model is a poor guide to the effects of supply-side shocks in depressed economies.
Published: JÉRÉMIE COHEN-SETTON & JOSHUA K. HAUSMAN & JOHANNES F. WIELAND, 2017. "Supply-Side Policies in the Depression: Evidence from France," Journal of Money, Credit and Banking, vol 49(2-3), pages 273-317. citation courtesy of