NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

How Could Everyone Have Been So Wrong? Forecasting the Great Depression with the Railroads

John Landon-Lane, Eugene N. White, Adam Klug

NBER Working Paper No. 9011
Issued in June 2002
NBER Program(s):   DAE

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.

download in pdf format
   (245 K)

email paper

This paper is available as PDF (245 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w9011

Published: 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. citation courtesy of

Users who downloaded this paper also downloaded these:
Bernanke w1054 Non-Monetary Effects of the Financial Crisis in the Propagation of the Great Depression
Cecchetti w6015 Understanding the Great Depression: Lessons for Current Policy
Temin w15645 The Great Recession and the Great Depression
Romer w3829 What Ended the Great Depression?
Bernanke w4814 The Macroeconomics of the Great Depression: A Comparative Approach
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us