IMF Working Papers

Is the Cycle the Trend? Evidence From the Views of International Forecasters

By John C Bluedorn, Daniel Leigh

July 13, 2018

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John C Bluedorn, and Daniel Leigh. Is the Cycle the Trend? Evidence From the Views of International Forecasters, (USA: International Monetary Fund, 2018) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

We revisit the conventional view that output fluctuates around a stable trend by analyzing professional long-term forecasts for 38 advanced and emerging market economies. 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. By contrast, an analysis of Consensus Economics forecasts since 1989 suggest that output 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. Drawing upon evidence from the behavior of forecast errors, the persistence of actual output is typically weaker than forecasters expect, but still consistent with output shocks normally having large and permanent level effects.

Subject: Business cycles, Econometric analysis, Economic growth, Economic theory, Emerging and frontier financial markets, Financial crises, Financial markets, Supply shocks, Vector autoregression

Keywords: Advanced and emerging markets, Business cycles, Current-period output, Emerging and frontier financial markets, Emerging market sample, Estimation sample, Global, Ouput forecast, Output fluctuation, Output fluctuations, Output level, Output persistence, Point estimate, Real GDP, Shock proxy, Standard deviation, Supply shocks, Vector autoregression, WP

Publication Details

  • Pages:

    29

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2018/163

  • Stock No:

    WPIEA2018163

  • ISBN:

    9781484363980

  • ISSN:

    1018-5941

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