Does the Survey of Professional Forecasters Help Predict the Shape of Recessions in Real Time? 

Yunjong Eo and James Morley

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: An updated version of our Markov-switching model of U.S. real GDP clearly 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 we consider whether our model could have predicted the shape of recessions in real time, we find that feeding in Survey of Professional Forecasters data helps to accurately predict the nature of recovery at the time of the trough for each of the last four recessions.

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)
Pages: 16 pages
Date: 2023-05
New Economics Papers: this item is included in nep-ets, nep-mac and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2023-24

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