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Is the “Great Recession” really so different from the past?

  • Chiu Adrian
  • Wieladek Tomasz


    (External MPC Unit, Bank of England, Threadneedle Street, London, EC2 8AHR, UK)

Based on the decline in real GDP growth, many economists now believe that the “Great Recession” is the deepest global economic contraction since the Great Depression. But as real-time real GDP data is typically revised, we investigate if the decline in, and total output loss (severity) of, G-7 real GDP during the “Great Recession” is really so different from the past. We use a GDP weighted average of, as well as a dynamic common factor extracted from, real-time G-7 real GDP data to verify if this is the case. Furthermore, we use a Mincer and Zarnowitz [Mincer, J., and V. Zarnowitz. 1969. “The Evaluation of Economic Forecasts.” NBER Volume: Economic Forecasts and Expectations: Analysis of Forecasting Behaviour and Performance, pp. 1–46.] forecast efficiency regression to predict the revision to G-7 real GDP growth during the “Great Recession,” based on outturns of unrevised variables. In real-time data, the depth and intensity of the “Great Recession” are similar to the mid-1970s recession. The Mincer and Zarnowitz model predicts significant revisions to G-7 real GDP for 2008Q4 and 2009Q1 of about 0.81% and 1.08%, respectively. Together these facts imply that G-7 real GDP growth during the “Great Recession” may yet be revised to be in line with past deep recessions.

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Article provided by De Gruyter in its journal The B.E. Journal of Macroeconomics.

Volume (Year): 13 (2013)
Issue (Month): 1 (October)
Pages: 48

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Handle: RePEc:bpj:bejmac:v:13:y:2013:i:1:p:48:n:1
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