The Harvard Barometers: Did they allow for the Prediction of the Great Depression of 1929?

Escañuela Romana, Ignacio (2009): The Harvard Barometers: Did they allow for the Prediction of the Great Depression of 1929?

Abstract

This paper reviews the possibility that the Harvard barometers would have been able to predict the Great Depression. Based on data from the ABC curves in August 1929, could the collapse of the stock market and the dramatic fall in economic activity have been predicted? It is now accepted that the Harvard barometers did not allow for the prediction of the crisis. This paper applies harmonic analysis, a well-known method at the time of the barometers, and a number of significance tests used at that historic moment. The Harvard barometers are broken down into sinusoid curves in order to check their forecast using the projection of these curves. The conclusion is: Harvard statisticians would have been able to predict the fall in speculation, as defined in curve A, but not the fall in business and money and credit conditions. Given this result, it is first questioned whether the detected regular fluctuations are an illusory effect of the composition of ABC curves, and second, whether it is useful to use such aggregate curves. It is concluded that, although aggregation does not have any predictive advantage, it is not the source of regularity.

• Item Type: MPRA Paper
• English Title: TThe Harvard Barometers: Did they allow for the Prediction of the Great Depression of 1929?
• Language: English
• Keywords: Harvard barometers, Periodogram, Business Cycles Prediction.
• Subjects: C - Mathematical and Quantitative Methods > C4 - Econometric and Statistical Methods: Special Topics > C43 - Index Numbers and Aggregation; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; Cycles; B - History of Economic Thought, Methodology, and Heterodox Approaches > B2 - History of Economic Thought since 1925 > B23 - Econometrics ; Quantitative and Mathematical Studies; C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes

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