Did Sunspot Forces Cause the Great Depression?

33 Pages Posted: 16 Apr 2002

See all articles by Sharon G. Harrison

Sharon G. Harrison

Barnard College

Mark Weder

Humboldt University of Berlin - Faculty of Economics; Centre for Economic Policy Research (CEPR)

Date Written: March 2002

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 1929-32, the subsequent slow recovery and the recession that occurred in 1937-38.

Keywords: Great Depression, sunspots, dynamic general equilibrium

JEL Classification: E32, N12

Suggested Citation

Harrison, Sharon G. and Weder, Mark, Did Sunspot Forces Cause the Great Depression? (March 2002). Available at SSRN: https://ssrn.com/abstract=307582

Sharon G. Harrison (Contact Author)

Barnard College ( email )

Department of Economics
3009 Broadway
New York, NY 10027
United States
212-854-3333 (Phone)

HOME PAGE: http://https://economics.barnard.edu/profiles/sharon-harrison

Mark Weder

Humboldt University of Berlin - Faculty of Economics ( email )

Spandauer Strasse 1
D-10178 Berlin
Germany
+49 30 2093 5710 (Phone)
+49 30 2093 5696 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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