Does the Survey of Professional Forecasters help predict the shape of recessions in real time?

Yunjong Eo and James Morley

Economics Letters, 2023, vol. 233, issue C

Abstract: An updated version of our Markov-switching model of U.S. real GDP suggests the COVID-19 recession was more U-shaped than L-shaped. As with linear time series models, it is important to account for extreme outliers during the pandemic, but a simple decay function for volatility from 2020Q2 leads to robust inferences. When considering whether our model could have predicted the shape of recessions in real time, we find that feeding in data from the Survey of Professional Forecasters accurately predicts the nature of recovery at the time of the trough for each of the last four recessions, including the COVID-19 recession.

Keywords: L-shaped recession; U-shaped recession; COVID-19; Markov switching; Real-time analysis (search for similar items in EconPapers)
JEL-codes: C22 C51 E32 E37 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:233:y:2023:i:c:s0165176523004457

DOI: 10.1016/j.econlet.2023.111419

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