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Analyzing U.S. Economy Performance: Are Challenges Looming Ahead?

This study conducted by Edward C. Prescott in September 2006 delves into the performance of the U.S. economy from 1959 to 2005. It analyzes detrended GDP per non-institutional population aged 16-64, post-1990 expansions and contractions, technology shocks, savings habits, deficit concerns, and the current account deficit. The conclusion highlights the overall positive performance compared to Europe and Japan, citing tax policies, government regulations, and commercial law as key factors.

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Analyzing U.S. Economy Performance: Are Challenges Looming Ahead?

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  1. Performance of U.S. Economy: Are there Problems Ahead?Edward C. PrescottSeptember 21, 2006

  2. Performance 1959.I to 2005.II U.S. Detrended (2%) GDP per Non-Institutional Pop. Age 16-64

  3. Expansions and Contractions

  4. Post 1990 Performance U.S. Detrended (2%) GDP per Non-Institutional Pop. Age 16-64

  5. The Late 1990 Boom • Wasn’t low tax rates • Wasn’t high “productivity” • Wasn’t Greenspan • Was technology shocks that led to huge expensed and sweat investment

  6. Are Americans Saving Enough? Answer: YES

  7. Is the Deficit a Problem? Answer: NO

  8. Is the Current Account Deficit a Problem?

  9. What is Going on? • Big unmeasured investment abroad • Value of our foreign assets bigger • Don’t see value of foreign subsidiaries – just sum of value of American domestic corporations plus their foreign subsidiaries

  10. Conclusion • U.S. economy is doing well – better than Europe or Japan Why? • Taxes have not been increased • Government regulatory policy better • One big problem is the destruction of a once good system of commercial law – but, there have been some recent modest reforms.

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