Scott Sumner has a post on the 26 year anniversary of the October 19 1987 stock market crash, dispelling some common held myths. Recently I did a post commenting on Roger Farmer´s view that the stock market crash of 2008 caused the Great Recession.
In this post I put the ‘famous three’ stock crashes together. One was followed by the Great Depression, another by the Great Recession while the 1987 crash was followed by a boom in real output.
The stock market crash of 2008-09 was the biggest, with the other two crashes being commensurate. Why no “Great Depression” in 1987 and 2008? Maybe because during 2008.QII and 2010.Q1 NGDP dropped by much less than in 1929QII-1931QI and it rose strongly between 1987QII-1989QI.