Prewar US Business Cycles under Uncertainty: Reconstructing Quarterly GDP before 1947

Raphael Auer

No 22133, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Official quarterly US GDP estimates begin in 1947; earlier quarterly histories must be reconstructed using annual benchmarks and historical indicators. To investigate uncertainty in these reconstructions, this paper systematically compares specifications drawn from the literature for reconstructing quarterly GDP during 1919–1946. The comparison evaluates predictions on concealed postwar quarters and separates variation across specifications from coefficient uncertainty within a model. Reconstruction choices matter, but their effects differ across episodes. Across 58 reconstruction specifications, the interquartile range of estimated peak-to-trough declines is 30.9–31.6% for the Great Depression, compared with 6.6–7.8% for 1937–1938. A reconstruction that augments the production-regression approach of Balke and Gordon (1986) with the Denton allocation used by Ramey and Zubairy (2018) has the lowest prediction error. Industrial production supplies information about quarterly movements, while annual accounts constrain the resulting path. Richer indicator panels, additional expenditure detail and more flexible relationships do not improve on this reconstruction’s predictive accuracy. Its estimated 7.07% decline in 1937–1938 is milder than the approximately 10.5–10.6% declines in those published reconstruc- tions. The reconstruction matches all six NBER recessions, but dates the first contraction two quarters earlier, from 1919Q3 to 1921Q1 rather than 1920Q1 to 1921Q3; its peak is the earliest allowed by the dating window.

Keywords: business cycle measurement; Great depression; Us economic history (search for similar items in EconPapers)
JEL-codes: C38 C43 E32 N12 (search for similar items in EconPapers)
Date: 2026-11
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