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Journal of Economic Literature: Vol. 51 No. 4 (December 2013)

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Facts and Challenges from the Great Recession for Forecasting and Macroeconomic Modeling

Article Citation

Ng, Serena, and Jonathan H. Wright. 2013. "Facts and Challenges from the Great Recession for Forecasting and Macroeconomic Modeling." Journal of Economic Literature, 51(4): 1120-54.

DOI: 10.1257/jel.51.4.1120

Abstract

This paper provides a survey of business cycle facts, updated to take account of recent data. Emphasis is given to the Great Recession, which was unlike most other postwar recessions in the United States in being driven by deleveraging and financial market factors. We document how recessions with financial market origins are different from those driven by supply or monetary policy shocks. This helps explain why economic models and predictors that work well at some times do poorly at other times. We discuss challenges for forecasters and empirical researchers in light of the updated business cycle facts.

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Authors

Ng, Serena (Columbia U)
Wright, Jonathan H. (Johns Hopkins U)

JEL Classifications

C53: Forecasting Models; Simulation Methods
E32: Business Fluctuations; Cycles
E37: Prices, Business Fluctuations, and Cycles: Forecasting and Simulation: Models and Applications
E43: Interest Rates: Determination, Term Structure, and Effects
E44: Financial Markets and the Macroeconomy
E52: Monetary Policy
G01: Financial Crises


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