Publications

Journal Article

This paper traces US national wealth from 1914 through 2015 and constructs a multivariate econometric model that combines elements of short-term and long-term dynamics.

The authors find that US wealth depends on a range of macroeconomic variables, including the wealth itself observed in the previous period, change in market capitalization, change in US house price index and inflation. Less impactful, statistically significant factors included unemployment, changes in oil price, and change in debt-to-GDP ratio.

Another significant result is that the Glass–Steagall Act, which prohibited commercial banks from speculative activity in the stock market after 1933, had a statistically significant positive impact on wealth in the US. The authors test the model by asking whether it could have anticipated the actual collapse in 2008, given prior data up to 2000, 2005 and 2010. All three tests forecasted a sharp wealth decline starting in 2008, followed by a recovery.

These results suggest the possibility of forecasting future financial collapses. The authors have found their model to be slightly more accurate in the short run than in the long run.