How did forecasters respond to the American growth slowdown of the mid-2000s?

ABSTRACT

Worldwide growth has slowed down in the mid-2000s. This paper both confirms this result for the United States and looks at how four major forecasting organizations responded to this slowdown in GDP growth. Real GDP is unambiguously and consistently below its forecasted level and so forecast errors are persistently positive for all forecasters, consistent with a growth slowdown that forecasters were slow to acknowledge. In response to this slowdown, all forecasters overestimated growth but eventually downgraded their forecasts. We also consider overall forecaster accuracy given this GDP growth slowdown.

KEYWORDS:

• Forecast errors
• growth slowdown
• potential GDP
• Great Recession

JEL CLASSIFICATION:

• E17
• E37
• O47

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Funding

This work was supported by the Institute of New Economic Thinking [INO15-00019].