Munich Personal RePEc Archive

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?

This is the latest version of this item.

[img]
Preview
PDF
MPRA_paper_49225.pdf

Download (197kB) | Preview

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.

Available Versions of this Item

UB_LMU-Logo
MPRA is a RePEc service hosted by
the Munich University Library in Germany.