Was the deflation of the depression anticipated? An inference using real-time data

Gabriel Mathy and Herman Stekler

Journal of Economic Methodology, 2018, vol. 25, issue 2, 117-125

Abstract: Theories that explain the behavior of the economy during the Depression are based on assumptions about agents’ expectations about future price trends. This paper uses an alternative methodological approach which utilizes real-time information from the Depression period to infer whether deflation was anticipated. The information includes the forecasting methodology of that time as well as projections about anticipated output that were obtained from the textual analysis of business statements, converting qualitative to quantitative data. We infer that deflation was not anticipated because agents did not expect economic output to consistently decrease.

Date: 2018
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Working Paper: Was the Deflation of the Depression Anticipated? An Inference Using Real-time Data (2017)
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DOI: 10.1080/1350178X.2017.1407437

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