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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

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  • Peter Temin

Abstract

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.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jel.46.3.669
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Bibliographic Info

Article provided by American Economic Association in its journal Journal of Economic Literature.

Volume (Year): 46 (2008)
Issue (Month): 3 (September)
Pages: 669-84

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Handle: RePEc:aea:jeclit:v:46:y:2008:i:3:p:669-84

Note: DOI: 10.1257/jel.46.3.669
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  1. Jordi Galí & Mark Gertler, 2007. "Macroeconomic Modeling for Monetary Policy Evaluation," NBER Working Papers 13542, National Bureau of Economic Research, Inc.
  2. Christina D. Romer, 1993. "The Nation in Depression," Journal of Economic Perspectives, American Economic Association, vol. 7(2), pages 19-39, Spring.
  3. Timothy Kehoe & Edward Prescott, 2002. "Data Appendix to Great Depressions of the Twentieth Century," Technical Appendices kehoe02, Review of Economic Dynamics.
  4. Feinstein, Charles H. & Temin, Peter & Toniolo, Gianni, 2008. "The World Economy between the World Wars," OUP Catalogue, Oxford University Press, number 9780195307559.
  5. Corbo, Vittorio, 1997. "Trade Reform and Uniform Import Tariffs: The Chilean Experience," American Economic Review, American Economic Association, vol. 87(2), pages 73-77, May.
  6. Timothy J. Kehoe & Edward C. Prescott (), 2007. "Great depressions of the twentieth century," Monograph, Federal Reserve Bank of Minneapolis, number 2007gdott.
  7. John W. Kendrick, 1961. "Productivity Trends in the United States," NBER Books, National Bureau of Economic Research, Inc, number kend61-1, May.
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Cited by:
  1. Nicholas Crafts & Peter Fearon, 2010. "Lessons from the 1930s Great Depression," Oxford Review of Economic Policy, Oxford University Press, vol. 26(3), pages 285-317, Autumn.
  2. Harrison, Sharon & Weder, Mark, 2009. "Technological change and the roaring twenties: A neoclassical perspective," Journal of Macroeconomics, Elsevier, vol. 31(3), pages 363-375, September.
  3. Heinz-Peter Spahn, 2009. "The New Keynesian Microfoundations of Macroeconomics," Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim 317/2009, Department of Economics, University of Hohenheim, Germany.
  4. Timothy J. Kehoe & Edward C. Prescott, 2008. "Using the general equilibrium growth model to study great depressions: a reply to Temin," Staff Report 418, Federal Reserve Bank of Minneapolis.
  5. Jon D. Wisman & Aaron Pacitti, 2013. "Ending the Crisis With Guaranteed Employment and Retraining," Working Papers 2013-12, American University, Department of Economics.
  6. Strulik, Holger & Trimborn, Timo, 2009. "Fiscal Stimulus: A Neoclassical Perspective," Hannover Economic Papers (HEP) dp-421, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.

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