Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/189885
Authors: 
Cai, Michael
Del Negro, Marco
Giannoni, Marc P.
Gupta, Abhi
Li, Pearl
Moszkowski, Erica
Year of Publication: 
2018
Series/Report no.: 
Staff Report 844
Abstract: 
The years following the Great Recession were challenging for forecasters. Unlike other deep downturns, this recession was not followed by a swift recovery, but generated a sizable and persistent output gap that was not accompanied by deflation as a traditional Phillips curve relationship would have predicted. Moreover, the zero lower bound and unconventional monetary policy generated a policy environment without precedents. We document the real real-time forecasting performance of the New York Fed dynamic stochastic general equilibrium (DSGE) model during this period and explain the results using the pseudo real-time forecasting performance results from a battery of DSGE models. We find the New York Fed DSGE model's forecasting accuracy to be comparable to that of private forecasters - and notably better, for output growth, than the median forecasts from the FOMC's Summary of Economic Projections. The model's financial frictions were key in obtaining these results, as they implied a slow recovery following the financial crisis.
Subjects: 
DSGE models
real-time forecasts
Great Recession
financial frictions
JEL: 
C11
C32
C54
E43
E44
Document Type: 
Working Paper

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