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

Author

Listed:
  • Yunjong Eo
  • James Morley

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.

Suggested Citation

  • Yunjong Eo & James Morley, 2023. "Does the Survey of Professional Forecasters Help Predict the Shape of Recessions in Real Time? ," CAMA Working Papers 2023-24, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:camaaa:2023-24
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    File URL: https://cama.crawford.anu.edu.au/sites/default/files/publication/cama_crawford_anu_edu_au/2023-05/24_2023_eo_morley_0.pdf
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    More about this item

    Keywords

    L-shaped recession; U-shaped recession; COVID-19; Markov switching; real-time analysis;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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