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The Great Depression and Output Persistence
Christian J. Murray and Charles R. Nelson
Journal of Money, Credit and Banking
Vol. 34, No. 4 (Nov., 2002), pp. 1090-1098
Published by: Ohio State University Press
Stable URL: http://www.jstor.org/stable/3270729
Page Count: 9
You can always find the topics here!Topics: Great Depression, Statistical models, Time series, Macroeconomics, Statistical estimation, Economic models, Political economy, Heteroskedasticity, Parametric models, Empirical evidence
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The persistence of shocks to aggregate output has been the subject of continuing investigation since Nelson and Plosser (1982) suggested they are largely permanent. Recent literature reaches mixed conclusions, largely due to disagreement about how to treat the Great Depression. We estimate output persistence based on a parametric bootstrap of a Markov-switching model for GDP 1870-1994 in which the economy can switch in and out of a turbulent state. Our results suggest that real shocks persist indefinitely if we drop the maintained assumption of homoskedasticity in favor of a Markov-switching representation of the Great Depression.
Journal of Money, Credit and Banking © 2002 Ohio State University Press