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The Great Moderation, Forecast Uncertainty, and the Great Recession

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Abstract

The Great Recession of 2007-09 was a dramatic macroeconomic event, marked by a severe contraction in economic activity and a significant fall in inflation. These developments surprised many economists, as documented in a recent post on this site. One factor cited for the failure to anticipate the magnitude of the Great Recession was a form of complacency affecting forecasters in the wake of the so-called Great Moderation. In this post, we attempt to quantify the role the Great Moderation played in making the Great Recession appear nearly impossible in the eyes of macroeconomists.

Suggested Citation

  • Ging Cee Ng & Andrea Tambalotti, 2012. "The Great Moderation, Forecast Uncertainty, and the Great Recession," Liberty Street Economics 20120514, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:86805
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    File URL: https://libertystreeteconomics.newyorkfed.org/2012/05/the-great-moderation-forecast-uncertainty-and-the-great-recession.html
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    Cited by:

    1. Friedrich Lucke, 2022. "The Great Moderation and the Financial Cycle," Working Papers REM 2022/0238, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.

    More about this item

    Keywords

    Macroeconomics; Forecasting; Great Recession;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment

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