Modeling Great Depressions: The Depression in Finland in the 1990s

Juan Carlos Conesa (), Timothy J. Kehoe () and Kim Ruhl ()

No 13591, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper is a primer on the great depressions methodology developed by Cole and Ohanian (1999, 2007) and Kehoe and Prescott (2002, 2007). We use growth accounting and simple dynamic general equilibrium models to study the depression that occurred in Finland in the early 1990s. We find that the sharp drop in real GDP over the period 1990-93 was driven by a combination of a drop in total factor productivity (TFP) during 1990-92 and of increases in taxes on labor and consumption and increases in government consumption during 1989-94, which drove down hours worked in Finland. We attempt to endogenize the drop in TFP in variants of the model with an investment sector and with terms-of-trade shocks but are unsuccessful.

JEL-codes: E13 E32 E50 F41 F59 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-mac
Date: 2007-11
Note: EFG
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Working Paper: Modeling great depressions: the depression in Finland in the 1990s (2007)
Journal Article: Modeling great depressions: the depression in Finland in the 1990s (2007)
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