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Was the Deflation During the Great Depression Anticipated? Evidence from the Commodity Futures Market

James D. Hamilton
The American Economic Review
Vol. 82, No. 1 (Mar., 1992), pp. 157-178
Stable URL: http://www.jstor.org/stable/2117608
Page Count: 22
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Was the Deflation During the Great Depression Anticipated? Evidence from the Commodity Futures Market
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Abstract

Futures prices were well above spot prices for most commodities during most of the Great Depression; evidently the spectacular declines in agricultural prices caught many people by surprise. Based on the historical correlations between commodity prices and consumer prices, commodity markets anticipated stable consumer prices during the first year of the Great Depression. The dramatic drop in nominal Treasury-bill yields thus should be read as a drop in ex ante real rates. Later in the Great Depression, markets anticipated deflation, but not as severe as actually occurred.

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