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Forecasting the 1937-1938 Recession: Quantifying Contemporary Newspaper Forecasts

Author

Listed:
  • Gabriel Mathy

    (American University)

  • Christian Roatta

    (The London School of Economics and Political Science)

Abstract

Economic analysts were not able to forecast the Great Contraction of the early 1930s, as previous work has shown (Goldfarb et al., 2005; Mathy and Stekler, 2016). In 1937, with full recovery from the Depression still incomplete, another severe recession struck which lasted about a year. We use a well-established method to convert qualitative forecasts into quantitative scores and use these scores to study forecaster performance in this period. For the peak of the business cycle, we find similar results for this recession as for the 1929-1933 recession in that forecasters largely failed to forecast this downturn. Forecasters also remained overoptimistic throughout the recession, seeing a recovery as imminent, and failed to forecast the recession’s trough. We discuss similarities and differences with the performance of business analysts in the 1929-1933 and 1937-1938 recessions, as well as the methods and heuristics used to construct forecasts in this period.

Suggested Citation

  • Gabriel Mathy & Christian Roatta, 2018. "Forecasting the 1937-1938 Recession: Quantifying Contemporary Newspaper Forecasts," Working Papers 2018-004, The George Washington University, Department of Economics, H. O. Stekler Research Program on Forecasting.
    • Handle: RePEc:gwc:wpaper:2018-004
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    References listed on IDEAS

    as
    1. Mathy, Gabriel & Stekler, Herman, 2017. "Expectations and forecasting during the Great Depression: Real-time evidence from the business press," Journal of Macroeconomics, Elsevier, vol. 53(C), pages 1-15.
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    5. Michael D. Bordo & Joseph G. Haubrich, 2017. "Deep Recessions, Fast Recoveries, And Financial Crises: Evidence From The American Record," Economic Inquiry, Western Economic Association International, vol. 55(1), pages 527-541, January.
    6. Jaremski, Matthew & Mathy, Gabriel, 2018. "How was the quantitative easing program of the 1930s Unwound?," Explorations in Economic History, Elsevier, vol. 69(C), pages 27-49.
    7. Klug, Adam & Landon-Lane, John S. & White, Eugene N., 2005. "How could everyone have been so wrong? Forecasting the Great Depression with the railroads," Explorations in Economic History, Elsevier, vol. 42(1), pages 27-55, January.
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    14. Anna, Petrenko, 2016. "Мaркування готової продукції як складова частина інформаційного забезпечення маркетингової діяльності підприємств овочепродуктового підкомплексу," Agricultural and Resource Economics: International Scientific E-Journal, Agricultural and Resource Economics: International Scientific E-Journal, vol. 2(1), March.
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    More about this item

    Keywords

    Macroeconomic Forecasting; Textual Analysis; Great Depression; 1937-1938 recession; Qualitative/Quantitative analysis;
    All these keywords.

    JEL classification:

    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • N12 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - U.S.; Canada: 1913-
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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