Did Sunspot Forces Cause the Great Depression ? ¤

  title={Did Sunspot Forces Cause the Great Depression ? ¤},
  author={Sharon G. Harrison},
We apply a dynamic general equilibrium model to the period of the Great Depression. In particular, we examine a modi ̄cation of the real business cycle model in which the possibility of indeterminacy of equilibria arises. In other words, agents' self-ful ̄lling expectations can serve as a primary impulse behind °uctuations. We ̄nd 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… CONTINUE READING
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