Is the Cycle the Trend? Evidence From the Views of International Forecasters

John Bluedorn and Daniel Leigh

No 2018/163, IMF Working Papers from International Monetary Fund

Abstract: 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.

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 (search for similar items in EconPapers)
Pages: 29
Date: 2018-07-13
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Citations: View citations in EconPapers (16)

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