A Technical Post: Seminar from Robert Barro

*I decided to write this post in English because it’d be more convenient and comfortable for me*

The conference I participated was delivered by Robert Barro, a strong liberal economist (‘sometimes attributed as the king of economy’), currently a faculty member in Harvard University. The speech was titled as “Macroeconomic Disasters since 1870” and was about his current study about the issue along with a Phd student.

As a statistician myself, the topic was interesting because they based on their analysis on a real data set of 36 countries in the scope of 136 years. So it is not hypothetical , i.e. real data, and they decided not to do any simulation to replace the missing values. They observed the frequencies of large scale macroeconomic declines, as per capita real GDP (which is the most common macroeconomic measure) and per capita consumer expenditure since 1869.

The sample consists basicly on OECD countries, Asia and Latin America however they decided to include Russia, Turkey and Ireland taking into account the drawbacks of these countries.

Even the study is still ongoing, the results are not surprising:

Ø The main macroeconomic disasters (in terms of number of cases and average size) in this time range are determined to be WW2 (with 34% average contraction, with 23 number of cases), WW1(24%,#20), Great Depression (1930) (21%, #18), Post-WW2 economic crises in Asia and Latin America (18%, 38)

Ø Other than war and economic crisis, The Great Influenza Epidemic is another case as considered a MacroEcon Disaster. Except from this there are no shocks that can be regarded as MacroEcon disasters.

Results:

Ø They calculated that every country faces a 3,5% “disaster probability” i.e. 3 possible macroeconomic disasters in every century.

The huge data set can be found in : http://www.economics.harvard.edu/faculty/barro/data_sets_barro