Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
967262 | Journal of Monetary Economics | 2006 | 13 Pages |
Abstract
We apply a dynamic general equilibrium model to the period of the U.S. Great Depression. In particular, we examine a modification of the real business cycle model in which the possibility of indeterminacy of equilibria arises. In other words, agents' self-fulfilling expectations can serve as a primary impulse behind fluctuations. We find that the model, driven only by these measured sunspot shocks, can explain well the entire Depression era. That is, the decline from 1929 to 1932, the subsequent slow recovery, and the recession that occurred in 1937-1938.
Related Topics
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Economics and Econometrics
Authors
Sharon G. Harrison, Mark Weder,