OECD Economics Department Working Papers

ISSN :
1815-1973 (online)
DOI :
10.1787/18151973
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Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

 

OECD Forecasts During and After the Financial Crisis

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Author(s):
Nigel Pain1, Christine Lewis1, Thai-Thanh Dang1, Yosuke Jin1, Pete Richardson
Author Affiliations
  • 1: OECD, France

Publication Date
17 Mar 2014
Bibliographic information
No.:
1107
Pages
91
DOI
10.1787/5jz73l1qw1s1-en

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This paper assesses the OECD’s projections for GDP growth and inflation during the global financial crisis and recovery, focussing on lessons that can be learned. The projections repeatedly over-estimated growth, failing to anticipate the extent of the slowdown and later the weak pace of the recovery – errors made by many other forecasters. At the same time, inflation was stronger than expected on average. Analysis of the growth errors shows that the OECD projections in the crisis years were larger in countries with more international trade openness and greater presence of foreign banks. In the recovery, there is little evidence that an underestimate of the impact of fiscal consolidation contributed significantly to forecast errors. Instead, the repeated conditioning assumption that the euro area crisis would stabilise or ease played an important role, with growth weaker than projected in European countries where bond spreads were higher than had been assumed. But placing these errors in a historical context illustrates that the errors were not without precedent: similar-sized errors were made in the first oil price shock of the 1970s. In response to the challenges encountered in forecasting in recent years and the lessons learnt, the OECD and other international organisations have sought to improve their forecasting techniques and procedures, to improve their ability to monitor near-term developments and to better account for international linkages and financial market developments.
Keywords:
economic fluctuations, economic outlook, fiscal policy, inflation, forecasting
JEL Classification:
  • E17: Macroeconomics and Monetary Economics / General Aggregative Models / Forecasting and Simulation: Models and Applications
  • E27: Macroeconomics and Monetary Economics / Macroeconomics: Consumption, Saving, Production, Employment, and Investment / Forecasting and Simulation: Models and Applications
  • E31: Macroeconomics and Monetary Economics / Prices, Business Fluctuations, and Cycles / Price Level; Inflation; Deflation
  • E32: Macroeconomics and Monetary Economics / Prices, Business Fluctuations, and Cycles / Business Fluctuations; Cycles
  • E37: Macroeconomics and Monetary Economics / Prices, Business Fluctuations, and Cycles / Forecasting and Simulation: Models and Applications
  • E62: Macroeconomics and Monetary Economics / Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook / Fiscal Policy
  • E66: Macroeconomics and Monetary Economics / Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook / General Outlook and Conditions
  • F47: International Economics / Macroeconomic Aspects of International Trade and Finance / Forecasting and Simulation: Models and Applications
  • G01: Financial Economics / General / Financial Crises