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Construction crises and business cycle: consequences for GDP forecasts

Eric Monnet () and C. Thubin

Rue de la Banque, 2017, issue 39

Abstract: How do we take into account the specificities of the construction sector to forecast GDP growth? Construction activity is usually highly correlated with the economic cycle, both upswings and downswings. However, during construction-specific crises, its developments differ markedly from those of the other sectors as in the early 1990s and from 2011 to 2015. The risk of making a construction-related error when forecasting GDP then increases for forecasting models that are mainly or exclusively based on manufacturing surveys - as is the case with the current quarter forecasting model (ISMA) at the Banque de France. A "safeguard" model, which isolates the value added of each sector, has been constructed to overcome this type of limitation and thus improve the results.

Date: 2017
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