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

30 Pages Posted: 22 Aug 2018

See all articles by John C. Bluedorn

John C. Bluedorn

International Monetary Fund (IMF) - Research Department

Daniel Leigh

International Monetary Fund (IMF)

Date Written: July 2018

Abstract

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.

Keywords: Business cycles, output fluctuations, output persistence, ouput forecast, advanced and emerging markets, jbluedorn@imforg, dleigh@imforg, Forecasting and Simulation

JEL Classification: E32, E37

Suggested Citation

Bluedorn, John C. and Leigh, Daniel, Is the Cycle the Trend? Evidence from the Views of International Forecasters (July 2018). IMF Working Paper No. 18/163. Available at SSRN: https://ssrn.com/abstract=3236779

John C. Bluedorn (Contact Author)

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Daniel Leigh

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
28
Abstract Views
99
PlumX Metrics