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Is the Cycle the Trend? Evidence From the Views of International Forecasters
Author:
Mr. John C Bluedorn
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and
Mr. Daniel Leigh
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Series:
IMF Working Papers
Volume/Issue:
Volume 2018: Issue 163
Language:
English
Publication Date:
13 Jul 2018
DOI:
https://doi.org/10.5089/9781484363980.001
ISBN:
9781484363980
ISSN:
1018-5941
Pages:
29
Keywords:
WP; real GDP; standard deviation; output persistence; business cycles; output fluctuations; ouput forecast; advanced and emerging markets; emerging market sample; current-period output; output fluctuation; point estimate; shock proxy; output level; estimation sample; Emerging and frontier financial markets; Supply shocks; Vector autoregression; Global
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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We revisit the conventional view that output fluctuates around a stable trend by analyzing professional long-term forecasts for 38 advanced and emerging market economies. If transitory deviations around a trend dominate output fluctuations, then forecasters should not change their long-term output level forecasts following an unexpected change in current period output. By contrast, an analysis of Consensus Economics forecasts since 1989 suggest that output forecasts are super-persistent—an unexpected 1 percent upward revision in current period output typically translates into a revision of ten year-ahead forecasted output by about 2 percent in both advanced and emerging markets. Drawing upon evidence from the behavior of forecast errors, the persistence of actual output is typically weaker than forecasters expect, but still consistent with output shocks normally having large and permanent level effects.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2018: Issue 163