Forecasts of the Lost Recovery

Cai, Michael; Del Negro, Marco; Giannoni, Marc; Gupta, Abhi; Li, Pearl

Discussion Paper

Forecasts of the Lost Recovery

Abstract: The years following the Great Recession were challenging for forecasters for a variety of reasons, including an unprecedented policy environment. This post, based on our recently released working paper, documents the real-time forecasting performance of the New York Fed dynamic stochastic general equilibrium (DSGE) model in the wake of the Great Recession. We show that the model’s predictive accuracy was on par with that of private forecasters and proved to be quite a bit better, at least in terms of GDP growth, than that of the median forecasts from the Federal Open Market Committee’s (FOMC) Summary of Economic Projections (SEP).

Keywords: Great Recession; Real-time Forecasts; DSGE Models; Financial Frictions;

JEL Classification: E27; G01;