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The Swiss Disease: Facts and Artefacts, A Reply to Kehoe and Prescott

  • Yngve Abrahamsen

    (Swiss Federal Institute of Technology-Zurich)

  • Roland Aeppli

    (Swiss Federal Institute of Technology-Zurich)

  • Erdal Atukeren

    (Swiss Federal Institute of Technology-Zurich)

  • Michael Graff

    (Reserve Bank of New Zealand)

  • Christian Müller

    (Swiss Federal Institute of Technology-Zurich)

  • Bernd Ships

    (Swiss Federal Institute of Technology-Zurich)

This paper investigates the claim made by Kehoe and Prescott (2002) that Switzerland and New Zealand experienced 'great depressions' in the last two decades. We question the appropriateness of the measure used by Kehoe and Prescott (GDP per working-age person) and propose a more accurate measure to compare economic performance on a consistent basis, namely, GDP per hour worked which is also adjusted for terms of trade changes and investment in tangibles. Based on this yardstick, the difference in economic performance between the US and Switzerland turns out to be largely a statistical artefact and Kehoe and Prescott's conditions for a 'great depression.' (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1016/j.red.2004.06.003
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Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 8 (2005)
Issue (Month): 3 (July)
Pages: 749-758

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Handle: RePEc:red:issued:v:8:y:2005:i:3:p:749-758
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  1. Timothy J. Kehoe & Edward C. Prescott (), 2007. "Great depressions of the twentieth century," Monograph, Federal Reserve Bank of Minneapolis, number 2007gdott.
  2. Timothy Kehoe & Edward Prescott, 2002. "Data Appendix to Great Depressions of the Twentieth Century," Technical Appendices kehoe02, Review of Economic Dynamics.
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