Is the ‘Great Recession’ Really so Different From the Past?

42 Pages Posted: 14 Nov 2015

Date Written: June 01, 2013

Abstract

Based on the decline in real GDP growth, many economists now believe that the ‘Great Recession’, the output contraction the world experienced in 2008–09, is the deepest global economic contraction since the Great Depression. But as real-time real GDP data are typically revised, we investigate if the decline in, and total output loss (severity) of, G-7 real GDP during the ‘Great Recession’ is really so different from the past. We use a GDP weighted average of, as well as a dynamic common factor extracted from, real-time G-7 real GDP data to verify if this is the case. Furthermore, we use a Mincer-Zarnowitz (1969) forecast efficiency regression to predict the revision to G-7 real GDP growth during the ‘Great Recession’, based on outturns of unrevised variables. In real-time data, the depth and intensity of the ‘Great Recession’ are similar to the mid-1970s recession. The Mincer-Zarnowitz (1969) model predicts a revision to G-7 real GDP growth of about 1.9%. Tentatively these facts imply that G-7 real GDP growth during the 2008–09 period may yet be revised to be in line with past deep recessions, but this conclusion is subject to the caveat that the revisions process may have changed over time.

Keywords: Real-time data, international business cycle, dynamic common factor model, Great Recession.

JEL Classification: F44.

Suggested Citation

Wieladek, Tomasz and Chiu, Adrian, Is the ‘Great Recession’ Really so Different From the Past? (June 01, 2013). Available at SSRN: https://ssrn.com/abstract=2689726 or http://dx.doi.org/10.2139/ssrn.2689726

Tomasz Wieladek (Contact Author)

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Adrian Chiu

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
11
Abstract Views
314
PlumX Metrics