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Professional Forecasters' View of Permanent and Transitory Shocks to GDP

  • Spencer D. Krane

This paper examines how the professional forecasters comprising the Blue Chip Economic Consensus view shocks to GDP. I use an unobserved components model of the forecast revisions to identify forecasters' perceptions of permanent and transitory shocks to GDP. The model indicates forecasters: attribute about two-thirds of the variance in current-period revisions to permanent shocks; view the relative importance of permanent shocks similar to the estimates of some simple univariate econometric models; see high-frequency indicators of economic activity as being informative about both permanent and transitory shocks; and react to incoming data differently during periods of economic weakness. (JEL C51, C53, E23, E27, E32, E37)

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Article provided by American Economic Association in its journal American Economic Journal: Macroeconomics.

Volume (Year): 3 (2011)
Issue (Month): 1 (January)
Pages: 184-211

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Handle: RePEc:aea:aejmac:v:3:y:2011:i:1:p:184-211
Note: DOI: 10.1257/mac.3.1.184
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  1. Peter K. Clark, 1987. "The Cyclical Component of U. S. Economic Activity," The Quarterly Journal of Economics, Oxford University Press, vol. 102(4), pages 797-814.
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  11. Andrew Bauer & Robert A. Eisenbeis & Daniel F. Waggoner & Tao Zha, 2003. "Forecast evaluation with cross-sectional data: The Blue Chip Surveys," Economic Review, Federal Reserve Bank of Atlanta, issue Q2, pages 17-31.
  12. David L. Reifschneider & Peter Tulip, 2007. "Gauging the uncertainty of the economic outlook from historical forecasting errors," Finance and Economics Discussion Series 2007-60, Board of Governors of the Federal Reserve System (U.S.).
  13. Spencer D. Krane, 2003. "An evaluation of real GDP forecasts: 1996-2001," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q I, pages 2-21.
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  15. Watson, Mark W., 1986. "Univariate detrending methods with stochastic trends," Journal of Monetary Economics, Elsevier, vol. 18(1), pages 49-75, July.
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