The Swiss Disease: Facts and Artefacts, A Reply to Kehoe and Prescott
Michael Graff (),
Christian Müller () and
Bernd Ships Additional contact information Yngve Abrahamsen: Swiss Federal Institute of Technology-Zurich
Roland Aeppli: 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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