Deflation of 1930-32 Anticipated: High Real Interest Rates Revealed.
The Great Depression deflation of 1930-32 was actually anticipated, not unexpected. Prices were serially correlated, meaning people expected deflation to continue once it started. This suggests that real interest rates were very high during the early 1930s, contradicting theories that believed in reflation. Monetary contraction, not unanticipated deflation, was the main cause of the economic decline.