Working Paper: NBER ID: w2095
Authors: Ray C. Fair; Matthew U. Shapiro; Kathryn M. Dominguez
Abstract: Was the Depression forecastable? After the Crash, how long did it take contemporary economic forecasters to realize how severe the downturn was going to be? How long should it Have taken them to come to this realization? These questions are addressed by studying the predictions of the Harvard Economic Service and Yale's Irving Fisher during 1929 and the early 1930's. The data assembled by the Harvard and Yale forecasters are subjected to modern statistical analysis to learn whether their verbal pronouncements were consistent with the data. We find that both the Harvard and Yale forecasters were systematically too optimistic, yet nothing in the data suggests that the optimism was unwarranted.
Keywords: Economic forecasting; Great Depression; Harvard Economic Service; Irving Fisher
JEL Codes: N12; N22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| speculation index (curve a) (D84) | business index (curve b) (E32) |
| declines in speculation index (curve a) (E32) | declines in business index (curve b) (F44) |
| Harvard Economic Service's indices (C43) | forecasting of economic activity (E37) |
| Harvard Economic Service's indices did not forecast impending downturn (P17) | actual data supports lagging rather than leading relationship (E32) |
| forecasters' optimism based on data available (C53) | failure to predict severity of downturn (E32) |