Crises and Recoveries in an Empirical Model of Consumption Disasters

@article{Nakamura2010CrisesAR,
  title={Crises and Recoveries in an Empirical Model of Consumption Disasters},
  author={Emi Nakamura and J{\'o}n Bjarni Steinsson and Robert J. Barro and Jos{\'e} F. Urs{\'u}a},
  journal={ERN: Forecasting \& Simulation (Consumption) (Topic)},
  year={2010}
}
We estimate an empirical model of consumption disasters using a new panel data set on personal consumer expenditure for 24 countries and more than 100 years, and study its implications for asset prices. The model allows for permanent and transitory effects of disasters that unfold over multiple years. It also allows the timing of disasters to be correlated across countries. Our estimates imply that the average disaster reaches its trough after 6 years, with a peak-to-trough drop in consumption… 

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