Posted by: Dirk | March 25, 2008

Great Depressions

When I tell people that I believe the financial crisis is about to get worse, most look amazed, especially when mentioning that it might be close to the Great Depression. Edward Prescott and Timothy Kehoe (2002 paper) find that the Great Depression was not a unique event. I merged their graphs one and two. The graph shows output, indexed to 100 in 1928/1980 respectively (The Latin American countries are set in the latter scenario). Here is the result:

Depressions

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