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Is the “Great Recession” really so different from the past?

Author

Listed:
  • Chiu Adrian

    (External MPC Unit, Bank of England, Threadneedle Street, London, EC2 8AHR, UK)

  • Wieladek Tomasz

    (External MPC Unit, Bank of England, Threadneedle Street, London, EC2 8AHR, UK)

Abstract

Based on the decline in real GDP growth, many economists now believe that the “Great Recession” is the deepest global economic contraction since the Great Depression. But as real-time real GDP data is 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 and Zarnowitz [Mincer, J., and V. Zarnowitz. 1969. “The Evaluation of Economic Forecasts.” NBER Volume: Economic Forecasts and Expectations: Analysis of Forecasting Behaviour and Performance, pp. 1–46.] 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 and Zarnowitz model predicts significant revisions to G-7 real GDP for 2008Q4 and 2009Q1 of about 0.81% and 1.08%, respectively. Together these facts imply that G-7 real GDP growth during the “Great Recession” may yet be revised to be in line with past deep recessions.

Suggested Citation

  • Chiu Adrian & Wieladek Tomasz, 2013. "Is the “Great Recession” really so different from the past?," The B.E. Journal of Macroeconomics, De Gruyter, vol. 13(1), pages 1037-1084, October.
    • Handle: RePEc:bpj:bejmac:v:13:y:2013:i:1:p:48:n:1
    DOI: 10.1515/bejm-2012-0007
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    Cited by:

    1. Gilhooly, Robert & Weale, Martin & Wieladek, Tomasz, 2012. "Disaggregating the international business cycle," Discussion Papers 37, Monetary Policy Committee Unit, Bank of England.

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    More about this item

    Keywords

    dynamic common factor model; Great Recession; international business cycle; real-time data; JEL Classification Code: F44;
    All these keywords.

    JEL classification:

    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles

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