L ECTURE 1 Overview of U.S. Macroeconomic History and Data August - - PowerPoint PPT Presentation

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L ECTURE 1 Overview of U.S. Macroeconomic History and Data August - - PowerPoint PPT Presentation

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Economics 210c/236a Christina Romer Fall 2011 David Romer L ECTURE 1 Overview of U.S. Macroeconomic History and Data August 31, 2011 I. C HRISTINA R OMER :

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LECTURE 1 Overview of U.S. Macroeconomic History and Data

August 31, 2011

Economics 210c/236a Christina Romer Fall 2011 David Romer

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  • I. CHRISTINA ROMER: “SPURIOUS VOLATILITY IN

HISTORY UNEMPLOYMENT DATA”

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5 10 15 20 25 30 1/1/1890 1/1/1898 1/1/1906 1/1/1914 1/1/1922 1/1/1930 1/1/1938 1/1/1946 1/1/1954 1/1/1962 1/1/1970 1/1/1978 1/1/1986 1/1/1994 1/1/2002 Percent

Inconsistent Unemployment Data

From Historical Statistics of the United States

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2 4 6 8 10 12 14 1907 1915 1923 1931 1939 1947 1955 1963 1971 1979 1987 1995 2003 Percent

Inconsistent Unemployment Data

From Historical Statistics of the United States

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Inconsistent GDP Data

From Martin Neil Baily, “Stabilization Policy and Private Economic Behavior”

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Lebergott’s Methodology

Unemployed = Labor Force – Employed

  • Labor force is overestimated in recessions.
  • Employment is underestimated.
  • So unemployment is overestimated in recessions.
  • Just the opposite in booms.
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More Consistent Unemployment Data

From Christina Romer, ”Spurious Volatility in Historical Unemployment Data”

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From Christina Romer, ”Spurious Volatility in Historical Unemployment Data”

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Evaluation of Romer

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Implications of Findings

  • Depression stands out more.
  • Why wasn’t there a stabilization?
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  • II. JOSEPH DAVIS: “AN ANNUAL INDEX OF U.S.

INDUSTRIAL PRODUCTION, 1790-1915”

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Data Sources for Davis’s Index of Industrial Production

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Evaluation of Davis

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From Joseph Davis, “An Annual Index of Industrial Production, 1790-1915”

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From Joseph Davis, “An Annual Index of Industrial Production, 1790-1915”

1 2 3 4 5 6 7 8 1790 1798 1806 1814 1822 1830 1838 1846 1854 1862 1870 1878 1886 1894 1902 1910 Logarithms

Davis Index of Industrial Production

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From Joseph Davis, “An Annual Index of Industrial Production, 1790-1915”

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From Joseph Davis, “An Annual Index of Industrial Production, 1790-1915”

  • 0.25
  • 0.2
  • 0.15
  • 0.1
  • 0.05

0.05 0.1 0.15 0.2

1791 1796 1801 1806 1811 1816 1821 1826 1831 1836 1841 1846 1851 1856 1861 1866 1871 1876 1881 1886 1891 1896 1901 1906 1911

Percentage Change in Industrial Production

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  • 0.20
  • 0.15
  • 0.10
  • 0.05

0.00 0.05 0.10 0.15 0.20 1820 1825 1830 1835 1840 1845 1850 1855 1860 1865 1870 1875 1880 1885 1890 1895 1900 1905 1910 1915

Percentage Change in Industrial Production

Standard Deviation 1820-1889 0.060 1890-1915 0.089

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From Joseph Davis, “An Annual Index of Industrial Production, 1790-1915”

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Implications of Findings

  • May affect view of impact of panics in the 19th c.
  • Increasing frequency of cycles after 1890 may reflect

changes in price flexibility.

  • Changes in volatility may reflect the emergence of

demand-driven recessions.

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  • III. MARGARET MCCONNELL AND GABRIEL PEREZ-

QUIROS, “OUTPUT FLUCTUATIONS IN THE UNITED STATES: WHAT HAS CHANGED SINCE THE EARLY 1980’S?”

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From McConnell and Perez-Quiros, “Output Fluctuations in the United States”

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From Christina Romer, ”Changes in Business Cycles”

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From James Stock and Mark Watson, “Has the Business Cycle Changed?”

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From McConnell and Perez-Quiros, “Output Fluctuations in the United States”

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Has the Great Moderation Ended?

1953:Q2-1983:Q4 1984:Q1-1999:Q2 1984:Q1-2011:Q2 S.d. of quarterly GDP growth 1.14 0.53 0.65 (percentage points) S.d. of unemployment rate 1.70 1.00 1.46 (percentage points)

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  • IV. CHRISTOPHER HANES, “THE DEVELOPMENT OF

NOMINAL WAGE RIGIDITY IN THE LATE 19TH CENTURY”

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From J. Bradford DeLong, “America’s Peacetime Inflation,” in Romer and Romer, eds., Reducing Inflation: Motivation and Strategy (1997)

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  • 6
  • 4
  • 2

2 4 6 8 1/1/1866 1/1/1869 1/1/1872 1/1/1875 1/1/1878 1/1/1881 1/1/1884 1/1/1887 1/1/1890 1/1/1893 1/1/1896 1/1/1899 1/1/1902 1/1/1905 Percent

Hanes's Wage Inflation Series

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From Hanes, “The Development of Nominal Wage Rigidity in the Late 19th Century”

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From Hanes, “The Development of Nominal Wage Rigidity in the Late 19th Century”