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Type: Conference paper
Title: Technology, credit and confidence during the roaring twenties
Author: Harrison, S.
Weder, M.
Citation: Proceedings of the 2008 Southern Workshop in Macroeconomics, 2008, pp.1-30
Publisher: University of Auckland
Publisher Place: New Zealand
Issue Date: 2008
Series/Report no.: Working Papers ; 901
Conference Name: Southern Workshop in Macroeconomics (28 Mar 2008 : Auckland)
Statement of
Sharon G. Harrison and Mark Weder
Abstract: We compare and contrast alternative explanations of the Roaring Twenties. Starting with the RBC model as a benchmark, we also examine a model with indeterminacy and self-fulfilling expectations (SFE), and one with credit shocks. Historical and anecdotal evidence provides support for each of these set-ups. We use US data from 1889-1953 to estimate each of the relevant shocks, and the resulting model-driven output. Our results indicate that all three models replicate well the experience of the 1920s. We then estimate "horserace" regressions, which provide evidence of the explanatory power of each model above and beyond the others. Here the SFE model emerges as the winner, leading us to conclude that self-fulfilling confidence was the primary driving force behind the Roaring Twenties.
Keywords: Sunspots
Credit Shocks
Roaring Twenties
Appears in Collections:Aurora harvest 5
Economics publications

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