Is the Cycle the Trend? Evidence From the Views of International Forecasters
IMF Working Papers, July 13, 2018
Source details
- Canonical URL
- Is the Cycle the Trend? Evidence From the Views of International Forecasters
Other formats
Bibliographic details
- Authors: John C Bluedorn, Daniel Leigh
- Published: July 13, 2018
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484363980.001
Summary and research question
- Revisit of the conventional view that output fluctuates around a stable trend by analyzing professional long-term forecasts for 38 advanced and emerging market economies.
- Key test logic: 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.
Data and scope
- Forecast source: Consensus Economics forecasts.
- Sample coverage: 38 advanced and emerging market economies.
- Sample period: forecasts since 1989.
- Publication details: Pages: 29; Volume: 2018; Issue: 163; Series: Working Paper No. 2018/163; Stock No: WPIEA2018163; ISBN: 9781484363980; ISSN: 1018-5941.
- Authors and date: By John C Bluedorn, Daniel Leigh; July 13, 2018.
Main empirical findings
- 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.
- Evidence from forecast errors:
- The persistence of actual output is typically weaker than forecasters expect.
- Nonetheless, actual-output behavior is still consistent with output shocks normally having large and permanent level effects.
Interpretation and implications
- Forecasters' long-term views imply departures from the view that output deviations are purely transitory; instead, forecasters attribute substantial and persistent level effects to output shocks.
- The disconnect between forecasted persistence and realized persistence (forecast errors) suggests forecasters overestimate the permanence of shocks, even though realized data remain consistent with large permanent level effects on output.
Key statistics and exact magnitudes preserved from the source
- Sample size: 38 advanced and emerging market economies.
- Forecast horizon effect: unexpected 1 percent upward revision in current period output → about 2 percent revision in ten year-ahead forecasted output.
- Forecast sample start: since 1989.
- Pages: 29.
- Volume: 2018.
- Issue: 163.
- Series: Working Paper No. 2018/163.
- Stock No: WPIEA2018163.
- ISBN: 9781484363980.
- ISSN: 1018-5941.
- Publication date: July 13, 2018.
Source: John C Bluedorn and Daniel Leigh, "Is the Cycle the Trend? Evidence From the Views of International Forecasters", IMF Working Papers 2018, 163 (2018), July 13, 2018.
Content in this bundle
- Is the Cycle the Trend? Evidence from the Views of International Forecasters, WP/18/163, June 2018