IDEAS home Printed from https://ideas.repec.org/a/ksp/journ1/v5y2018i1p105-120.html
   My bibliography  Save this article

Did Harvard barometers allow for the prediction of the 1929 Stock market crash?

Author

Listed:
  • Ignacio Escañuela ROMANA

    (Universidad de Loyola, Chicago, Illinois. USA.)

Abstract

The Harvard barometers were an attempt to analyse and predict the business cycles, which took place in the 1920s. An initiative from the Harvard Economic Service (HES), it was one of the first and more important instrument used to try to understand the sequence in the economic fluctuations. This paper reconsiders the accepted position about the Harvard barometers, that using them it was impossible to predict the 1929 Depression. I arrive at a different conclusion. Based on the data from the ABC curves in August 1929, and with an available econometric methodology at that time, it would have been possible to forecast the fall in speculation, as defined in the curve A, whereas the fall in business (B), and in monetary and credit conditions (C) were unpredictable. The stock market crash could have been anticipated. The HES stated that curve A precedes B, and then C. This is not detected. This paper makes use of the harmonic analysis by breaking down series in sinusoidal curves. Taking into account this prediction, this work analyses if aggregation was the factor producing the perceived regularities. The conclusion is negative: aggregation did not produce those cycles, they were in the original data.

Suggested Citation

  • Ignacio Escañuela ROMANA, 2018. "Did Harvard barometers allow for the prediction of the 1929 Stock market crash?," Journal of Economics and Political Economy, KSP Journals, vol. 5(1), pages 105-120, March.
    • Handle: RePEc:ksp:journ1:v:5:y:2018:i:1:p:105-120
    as

    Download full text from publisher

    File URL: http://www.kspjournals.org/index.php/JEPE/article/download/1560/1556
    Download Restriction: no
    File URL: http://www.kspjournals.org/index.php/JEPE/article/view/1560
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Moore, Henry Ludwell, 1914. "Economics Cycles: Their law and cause," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number moore1914.
    2. Henry Ludwell Moore, 1921. "Generating Cycles of Products and Prices," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 35(2), pages 215-239.
    3. Wesley C. Mitchell, 1923. "Introduction to "Business Cycles and Unemployment"," NBER Chapters, in: Business Cycles and Unemployment, pages 1-6, National Bureau of Economic Research, Inc.
    4. Ritschl, Albrecht & Straumann, Tobias, 2009. "Business cycles and economic policy, 1914-1945: a survey," Economic History Working Papers 22402, London School of Economics and Political Science, Department of Economic History.
    5. Giovanni Favero, 2007. "Weather forecast or rain-dance? On inter-war business barometers," Working Papers 2007_14, Department of Economics, University of Venice "Ca' Foscari".
    6. Pierre-Cyrille Hautcoeur, 2006. "Why and how to measure stock market fluctuations? The early history of stock market indices, with special reference to the French case," PSE Working Papers halshs-00590522, HAL.
    7. Christina D. Romer, 1988. "The Great Crash and the Onset of the Great Depression," NBER Working Papers 2639, National Bureau of Economic Research, Inc.
    8. Harry E. Miller, 1924. "Earlier Theories of Crises and Cycles in the United States," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 38(2), pages 294-329.
    9. Warren M. Persons, 1926. "Theories of Business Fluctuations: I. A Classification of the Theories," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 41(1), pages 94-128.
    10. Wesley C. Mitchell, 1910. "The Rationality of Economic Activity," Journal of Political Economy, University of Chicago Press, vol. 18, pages 197-197.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Vianna Franco, Marco P. & Ribeiro, Leonardo Costa & Albuquerque, Eduardo da Motta e, 2022. "Beyond Random Causes: Harmonic Analysis Of Business Cycles At The Moscow Conjuncture Institute," Journal of the History of Economic Thought, Cambridge University Press, vol. 44(3), pages 456-476, September.
    2. Martínez, Juan Francisco & Oda, Daniel, 2021. "Characterization of the Chilean financial cycle, early warning indicators and implications for macro-prudential policies," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 2(1).
    3. Christopher L. Gilbert & Duo Qin, 2005. "The First Fifty Years of Modern Econometrics," Working Papers 544, Queen Mary University of London, School of Economics and Finance.
    4. Oet, Mikhail V. & Bianco, Timothy & Gramlich, Dieter & Ong, Stephen J., 2013. "SAFE: An early warning system for systemic banking risk," Journal of Banking & Finance, Elsevier, vol. 37(11), pages 4510-4533.
    5. Jose A Lopez & Kris James Mitchener, 2021. "Uncertainty and Hyperinflation: European Inflation Dynamics after World War I [Modeling and forecasting realized volatility]," The Economic Journal, Royal Economic Society, vol. 131(633), pages 450-475.
    6. Frederic S. Mishkin, 1991. "Asymmetric Information and Financial Crises: A Historical Perspective," NBER Chapters, in: Financial Markets and Financial Crises, pages 69-108, National Bureau of Economic Research, Inc.
    7. Valerie Cerra & Antonio Fatás & Sweta C. Saxena, 2023. "Hysteresis and Business Cycles," Journal of Economic Literature, American Economic Association, vol. 61(1), pages 181-225, March.
    8. Jean-Sébastien Lenfant, 2006. "Complementarity and Demand Theory: From the 1920s to the 1940s," History of Political Economy, Duke University Press, vol. 38(5), pages 48-85, Supplemen.
    9. Vincent Carret, 2020. "And yet it rocks! Fluctuations and growth in Ragnar Frisch's rocking horse model," Working Papers halshs-02969773, HAL.
    10. du Plessis, S.A., 2006. "Reconsidering the business cycle and stabilisation policies in South Africa," Economic Modelling, Elsevier, vol. 23(5), pages 761-774, September.
    11. Nandini Chandar & Paul Miranti, 2009. "Integrating accounting and statistics: Forecasting, budgeting and production planning at the American Telephone and Telegraph Company during the 1920s," Accounting and Business Research, Taylor & Francis Journals, vol. 39(4), pages 373-395.
    12. repec:hal:spmain:info:hdl:2441/eul7jlnf19iq8tdp0vlfv63n5 is not listed on IDEAS
    13. Malcolm Rutherford, 2001. "Institutional Economics: Then and Now," Journal of Economic Perspectives, American Economic Association, vol. 15(3), pages 173-194, Summer.
    14. Michaël Assous & Vincent Carret, 2021. "Relaxation oscillations in the early development of econometrics: coming (almost) full circle (1929-1951)," Working Papers halshs-03206795, HAL.
    15. Victor Zarnowitz, 1991. "What is a Business Cycle?," NBER Working Papers 3863, National Bureau of Economic Research, Inc.
    16. James H. Stock & Francesco Trebbi, 2003. "Retrospectives: Who Invented Instrumental Variable Regression?," Journal of Economic Perspectives, American Economic Association, vol. 17(3), pages 177-194, Summer.
    17. Richard Bluhm & Adam Szirmai, 2011. "Institutions, Inequality and Growth: A review of theory and evidence on the institutional determinants of growth and inequality," Papers inwopa634, Innocenti Working Papers.
    18. Michaelides, Michael & Spanos, Aris, 2020. "On modeling heterogeneity in linear models using trend polynomials," Economic Modelling, Elsevier, vol. 85(C), pages 74-86.
    19. Jihad Dagher, 2018. "Regulatory Cycles: Revisiting the Political Economy of Financial Crises," IMF Working Papers 2018/008, International Monetary Fund.
    20. Albrecht Ritschl, 2012. "War 2008 das neue 1929? Richtige und falsche Vergleiche zwischen der Großen Depression der 1930er Jahre und der Großen Rezession von 2008," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 13, pages 36-57, May.
    21. Matthias Morys & Martin Ivanov, 2015. "The emergence of a European region: business cycles in South-East Europe from political independence to World War II," European Review of Economic History, Oxford University Press, vol. 19(4), pages 382-411.

    More about this item

    Keywords

    Business cycles; 1929 crash; Forecasting; Periodogram; Economic history.;
    All these keywords.

    JEL classification:

    • B23 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Econometrics; Quantitative and Mathematical Studies
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • N12 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - U.S.; Canada: 1913-

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ksp:journ1:v:5:y:2018:i:1:p:105-120. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Bilal KARGI (email available below). General contact details of provider: http://www.kspjournals.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.