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.
