NBER Reporter Online, Volume 1992

A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics National Bureau of Economic Research (NBER) (Ed.) Periodical Part NBER Reporter Online, Volume 1992 NBER Reporter Online Provided in Cooperation with: National Bureau of Economic Research (NBER), Cambridge, Mass. Suggested Citation: National Bureau of Economic Research (NBER) (Ed.) (1992) : NBER Reporter Online, Volume 1992, NBER Reporter Online, National Bureau of Economic Research (NBER), Cambridge, MA This Version is available at: http://hdl.handle.net/10419/62093 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. 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SPRING 1992 Program Report The Development of the American Economy Claudia Goldin* Researchers in the NBER's Program on the Develop ment of the American Economy work primarily, but not exclusively, in the areas of labor and population, indus trial organization, financial and macroeconomic history, and political economy. The group's unified goal is a bet ter understanding of the evolution of the American econ omy and the roots of current policy issues. Because of the breadth of the work, I am able to highlight only two sets of research activities: one, in financial history, has been pursued actively by DAE members almost from the inception of the program; the other, in political economy, is a new initiative that will be the focus of a precon ference in October 1992 and an NBER conference in May 1993. Financial History in the DAE ulations such as deposit insurance, branch banking, and free banking, the transmission of economic fluctuations A substantial group of NBER researchers-including and financial intermediation in the history of savings. Faculty Research Fellows Charles W. Calomiris and J. A major priority of this group has been the development of Bradford De Long, and Research Associates Michael D. new time-series data on the returns to financial assets Bordo, Lance E. Davis, Barry J. Eichengreen, Claudia and individual-level longitudinal data on savings. Goldin, Naomi Lamoreaux, Hugh Rockoff, Christina D. Sylla, with Jack Wilson and Charles P. Jones, has Romer, Richard E. Sylla, and Eugene N. White-has compiled consistent monthly series on commercial pa been exploring the financial history of the United States. per rates, call money rates, and the return to corporate Their projects have revealed the long-run development stocks and bonds from the 1830s to the present. They of financial markets and institutions, as well as regulato find that stock and bond markets were less volatile be ry regimes and policy experiments of the past. Their fore 1914 than after, calling into question the efficacy of work has explored the volatility of stock prices since the many regulations and reforms introduced in the twenti 1830s, the crash of 1929 and the Great Depression, re eth century. They also find that, while there is a correla gional differences in antebellum interest rates, bank reg- tion between banking paniCS and stock market crashes, ., thank J. Bradford De Long, Gary D. Ubecap, Hugh Rockoff, Christi neither of the simplest hypotheses-that banking panics na D. Romer, and Richard E. Sylla for their help in preparing this report. caused crashes, or the reverse-can explain the corre- The National Bureau of Economic Research is a private, nonprotlt lation satisfactorily.1 Further work will be aimed at clari research organization founded in 1920 and devoted to objective quan titative analysis of the American economy. Its officers and board of fying the relationships among stock market crashes, directors are: banking panics, and downturns in economic activity. They also have investigated the relationship between fi Chairman-George T. Conklin, Jr. Vice Chairman-Paul W. McCracken nancial market conditions and the great merger wave in Treasurer-Charles A. Walworth U.S. manufacturing at the turn of this century. They find that low stock prices produced increased merger activity, President and Chief Executive Officer-Martin Feldstein Executive Director-Geoffrey Carliner a result that contrasts with the findings of others for sub Director of Finance and Administration-Sam Parker sequent merger waves, but one they regard as con sistent with investment theory.2 DIRECTORS AT LARGE De Long has focused on the determinants of major John Herron Biggs Franklin A. Lindsay long-run bull and bear markets in the United States and Andrew Brimmer Paul W. McCracken in other major industrial economies. He and NBER Re Carl F. Christ Leo Melamed search Associate Robert B. Barsky have found that ma George T. Conklin, Jr. Robert T. Parry Don R. Conlan Peter G. Peterson jor swings in the stock market since 1900 were driven by Kathleen B. Cooper Douglas D. Purvis investors' extrapolations of the recent past into the fu Jean A. Crockett Robert V. Roosa ture. 3 Each boom saw the market rise, as investors ex George C. Eads Richard N. Rosett Martin Feldstein Bert Seidman pected it to perSist indefinitely; each slump saw in George Hatsopoulos Eli Shapiro vestors fear that America faced permanent economic Lawrence R. Klein Donald S. Wasserman stagnation. DIRECTORS BY UNIVERSITY APPOINTMENT White and Peter Rappoport also have begun a large scale exploration of the stock market in the 1920s and Jagdish W. Bhagwati, Columbia 1930s. Using evidence from the call loan market, and William C. Brainard, Yale Glen G. Cain, Wisconsin new quarterly data on dividends, they find that lenders Franklin Fisher, Massachusetts Institute of Technology in the call market believed that the stock market was Jonathan R. T. Hughes, Northwestern likely to experience a large decline in 1929, evidence Saul H. Hymans, Michigan Marjorie B. McElroy, Duke suggesting that there was a bubble in the market. In re James L. Pierce, California, Berkeley search currently underway using newly collected cross Andrew Postlewaite, Pennsylvania sectional data, White and Rappoport find evidence of Nathan Rosenberg, Stanford excess comovement in stock prices, or "herding" behav Harold T. Shapiro, Princeton Craig Swan, Minnesota ior, but the phenomenon was more intense in the 1930s Michael Yoshino, Harvard than during 1929, a surprising conclusion that suggests Arnold Zellner, Chicago rumor and panic were important in the 1930s.4 DIRECTORS BY APPOINTMENT OF OTHER ORGANIZATIONS In her continuing research on the Great Depression, Romer shows that capital and gold flight from Europe in Marcel Boyer, Canadian Economics Association the late 1930s led to a major expansion in the U.S. mon Rueben C. Buse, American Agricultural Economics Association 5 Richard A. Easterlin, Economic History Association ey supply. Thus America's partial success at recovery Gail Fosler, The Conference Board was caused by the resulting expansion in the money A. Ronald Gallant, American Statistical Association stock and the consequent decline in the real interest Robert S. Hamada, American Finance Association Charles Lave, American Economic Association rate. Turbulence in Europe, not policy at home, was re Rudolph A. Oswald, American Federation of Labor and Congress sponsible. In related work, Eichengreen analyzes the of Industrial Organizations Dean P. Phypers, Committee for Economic Development James F. Smith, National Association of Business Economists Charles A. Walworth, American Institute of Certified Public 1 J. Wilson, R. E. Sylla, and C. P. Jones, "Financial Market Panics and Volatility in the Long Run, 1830-1988," in Crashes and Panics: A His Accountants torical Perspective, E. N. White, ed. Homewood, IL: Dow Jones Irwin, 1990; and R. E. Sylla, J. Wilson, and C. P. Jones, "U.S. Financial Mar Contributions to the National Bureau are tax deductible. Inquiries kets and Long-Term Economic Growth," in Economic Development in concerning contributions may be addressed to Martin Feldstein, Presi Historical Perspective, D. Schaeffer and T. Weiss, eds. Stanford: dent, NBER, 1050 Massachusetts Avenue, Cambridge, MA 02138. Stanford University Press, forthcoming. The Reporter is issued for informational purposes and has not been 2R. E. Sylla, J. Wilson, and C. P. Jones, "Financial Markets and the Great Merger Wave of 1895-1904," forthcoming as an NBER Histori reviewed by the Board of Directors of the NBER. It is not copyrighted cal Factors in Long-Run Growth Working Paper. and can be freely reproduced with appropriate attribution of source. Please provide the NBER's Public Information Department with

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