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Modeling Great Depressions: the depression in Finland in the 1990s *.
- Article from:
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Federal Reserve Bank of Minneapolis Quarterly Review
- Article date:
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November 1, 2007
- Author:
- Conesa, Juan Carlos; Kehoe, Timothy J.; Ruhl, Kim J.
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Copyright informationCOPYRIGHT 2007 Federal Reserve Bank of Minneapolis. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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The general equilibrium growth model is the workhorse of modern economics. It is the accepted paradigm for studying most macroeconomic phenomena, including business cycles, tax policy, monetary policy, and growth. The collection of papers edited by Kehoe and Prescott (2002, 2007) and earlier work by Cole and Ohanian (1999) break the taboo against using the general equilibrium growth model to study great depressions like that in the United States in the 1930s. This article is intended as a primer on the great depressions methodology.
If output is significantly above trend, the economy is in a boom. If it is significantly below trend, the economy is in a depression. Trend is ...