Did sunspot cause the Great Depression?

Sharon Harrison and Mark Weder

No 2002,35, SFB 373 Discussion Papers from Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes

Abstract: We apply a dynamic general equilibrium model to the period of the Great Depression. In particular, we examine a modification of the real business cycle model in which the possibility of indeterminacy of equilibria arises. In other words, agents' self-fulfilling expectations can serve as a primary impulse behind fluctuations. We find that the model, driven only by these measured sunspot shocks, can explain well the entire Depression era. That is, the decline from 1929-1932, the subsequent slow recovery, and the recession that occurred in 1937-1938.

Keywords: Great Depression; Sunspots; Dynamic General Equilibrium (search for similar items in EconPapers)
JEL-codes: E32 N12 (search for similar items in EconPapers)
Date: 2002
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:sfb373:200235

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