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Using the general equilibrium growth model to study great depressions: a reply to Temin

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  • Timothy J. Kehoe
  • Edward C. Prescott

Abstract

Three of the arguments made by Temin (2008) in his review of Great Depressions of the Twentieth Century are demonstrably wrong: that the treatment of the data in the volume is cursory; that the definition of great depressions is too general and, in particular, groups slow growth experiences in Latin America in the 1980s with far more severe great depressions in Europe in the 1930s; and that the book is an advertisement for the real business cycle methodology. Without these three arguments — which are the results of obvious conceptual and arithmetical errors, including copying the wrong column of data from a source — his review says little more than that he does not think it appropriate to apply our dynamic general equilibrium methodology to the study of great depressions, and he does not like the conclusion that we draw: that a successful model of a great depression needs to be able to account for the effects of government policy on productivity.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Minneapolis in its series Staff Report with number 418.

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Date of creation: 2008
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Handle: RePEc:fip:fedmsr:418

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  1. Romer, Christina D., 1994. "Remeasuring Business Cycles," The Journal of Economic History, Cambridge University Press, vol. 54(03), pages 573-609, September.
  2. Luca, PENSIEROSO, 2005. "Real Business Cycle Models of the Great Depression : a Critical Survey," Discussion Papers (ECON - Département des Sciences Economiques) 2005005, Université catholique de Louvain, Département des Sciences Economiques.
  3. Michel R. De Vroey & Luca Pensieroso, 2006. "Real Business Cycle Theory and the Great Depression: The Abandonment of the Abstentionist Viewpoint," The B.E. Journal of Macroeconomics, De Gruyter, vol. 0(1), pages 13.
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Cited by:
  1. Strulik, Holger & Trimborn, Timo, 2009. "Fiscal Stimulus: A Neoclassical Perspective," Diskussionspapiere der Wirtschaftswissenschaftlichen Fakultät der Leibniz Universität Hannover dp-421, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  2. Luca Pensieroso, 2011. "The Great Depression in Belgium from a Neoclassical Perspective," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 14(2), pages 389-402, Arpil.

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