IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

How Could Everyone Have Been So Wrong? Forecasting The Great Depression With The Railroads

  • Eugene N. White

    ()

    (Rutgers University and NBER)

  • John Landon-Lane

    ()

    (Rutgers University)

  • Adam Klug

    (Deceased)

Contemporary observers viewed the recession that began in the summer of 1929 as nothing extraordinary. Recent analyses have shown that the subsequent large deflation was econometrically forecastable, implying that a driving force in the depression was the high expected real interest rates faced by business. Using a neglected data set of forecasts by railroad shippers, we find that business was surprised by the magnitude of the great depression. We show that an ARIMA or Holt- Winters model of railroad shipments would have produced much smaller forecast errors than those indicated by the surveys. The depth and duration of the depression was beyond the experience of business, which appears to have believed that recovery would happen quickly as in previous recessions. This failure to anticipate the collapse of the economy suggests roles for both high real rates of interest and a debt deflation in the propagation of the depression.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: ftp://snde.rutgers.edu/Rutgers/wp/2002-09.pdf
Download Restriction: no

Paper provided by Rutgers University, Department of Economics in its series Departmental Working Papers with number 200209.

as
in new window

Length:
Date of creation: 04 Jun 2002
Date of revision:
Handle: RePEc:rut:rutres:200209
Contact details of provider: Postal: New Jersey Hall - 75 Hamilton Street, New Brunswick, NJ 08901-1248
Phone: (732) 932-7363
Fax: (732) 932-7416
Web page: http://snde.rutgers.edu/Rutgers/wp/rutgers-wplist.html

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. O'Brien, Anthony Patrick, 1989. "The ICC, freight rates, and the Great Depression," Explorations in Economic History, Elsevier, vol. 26(1), pages 73-98, January.
  2. Evans, Martin & Wachtel, Paul, 1993. "Were price changes during the Great Depression anticipated? : Evidence from nominal interest rates," Journal of Monetary Economics, Elsevier, vol. 32(1), pages 3-34, August.
  3. Christina D. Romer, 1991. "What Ended the Great Depression?," NBER Working Papers 3829, National Bureau of Economic Research, Inc.
  4. Hyllerberg, S. & Engle, R.F. & Granger, C.W.J. & Yoo, B.S., 1988. "Seasonal Integration And Cointegration," Papers 0-88-2, Pennsylvania State - Department of Economics.
  5. Dominguez, Kathryn M & Fair, Ray C & Shapiro, Matthew D, 1988. "Forecasting the Depression: Harvard versus Yale," American Economic Review, American Economic Association, vol. 78(4), pages 595-612, September.
  6. repec:cup:cbooks:9780521391559 is not listed on IDEAS
  7. Temin, Peter & Wigmore, Barrie A., 1990. "The end of one big deflation," Explorations in Economic History, Elsevier, vol. 27(4), pages 483-502, October.
  8. Christina D. Romer, 1993. "The Nation in Depression," Journal of Economic Perspectives, American Economic Association, vol. 7(2), pages 19-39, Spring.
  9. Charles Calomiris & David Wheelock, 1998. "Was the Great Depression a Watershed for American Monetary Policy?," NBER Chapters, in: The Defining Moment: The Great Depression and the American Economy in the Twentieth Century, pages 23-66 National Bureau of Economic Research, Inc.
  10. Lovell, Michael C, 1986. "Tests of the Rational Expectations Hypothesis," American Economic Review, American Economic Association, vol. 76(1), pages 110-24, March.
  11. Ehrbeck, Tilman & Waldmann, Robert, 1996. "Why Are Professional Forecasters Biased? Agency versus Behavioral Explanations," The Quarterly Journal of Economics, MIT Press, vol. 111(1), pages 21-40, February.
  12. Karl Brunner & Allan H. Meltzer, 1968. "What Did We Learn from the Monetary Experience of the United States in the Great Depression?," Canadian Journal of Economics, Canadian Economics Association, vol. 1(2), pages 334-348, May.
  13. Michael C. Lovell, 1964. "Determinants of Inventory Investment," NBER Chapters, in: Models of Income Determination, pages 177-231 National Bureau of Economic Research, Inc.
  14. Keane, Michael P & Runkle, David E, 1990. "Testing the Rationality of Price Forecasts: New Evidence from Panel Data," American Economic Review, American Economic Association, vol. 80(4), pages 714-35, September.
  15. Hamilton, James D, 1992. "Was the Deflation during the Great Depression Anticipated? Evidence from the Commodity Futures Market," American Economic Review, American Economic Association, vol. 82(1), pages 157-78, March.
  16. Bernanke, Ben S, 1983. "Nonmonetary Effects of the Financial Crisis in Propagation of the Great Depression," American Economic Review, American Economic Association, vol. 73(3), pages 257-76, June.
  17. Bonham, Carl & Cohen, Richard, 1995. "Testing the Rationality of Price Forecasts: Comment," American Economic Review, American Economic Association, vol. 85(1), pages 284-89, March.
  18. Michael C. Lovell, 1962. "Inventory Investment," Cowles Foundation Discussion Papers 131, Cowles Foundation for Research in Economics, Yale University.
  19. Hamilton, James D., 1987. "Monetary factors in the great depression," Journal of Monetary Economics, Elsevier, vol. 19(2), pages 145-169, March.
  20. Charles W. Calomiris, 1993. "Financial Factors in the Great Depression," Journal of Economic Perspectives, American Economic Association, vol. 7(2), pages 61-85, Spring.
  21. Bernanke, Ben & Gertler, Mark, 1989. "Agency Costs, Net Worth, and Business Fluctuations," American Economic Review, American Economic Association, vol. 79(1), pages 14-31, March.
  22. Thor Hultcren, 1955. "Forecasts of Railway Traffic," NBER Chapters, in: Short-Term Economic Forecasting, pages 363-380 National Bureau of Economic Research, Inc.
  23. Roy H. Webb, 1987. "The irrelevance of tests for bias in series of macroeconomic forecasts," Economic Review, Federal Reserve Bank of Richmond, issue Nov, pages 3-9.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:rut:rutres:200209. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.