News

September 2017 The research seminar is held every Wednesday, 1.15 – 2.45 p.m., in room LG 0.423.
Exceptions: On 11/15/2017, 11/22/2017 and 12/13/2017 the event is held in room 4.154!
Here you can download the Program-for-winter-term-2017/18
12/13/2017

Room LG 4.154

Jonas Dovern, Universität Heidelberg
“Recessions and Potential Output: Disentangling Measurement Errors, Supply Shocks, and Hysteresis Effects”

 

Abstract:

This paper investigates expert revisions of potential output (PO) estimates after recessions. Using OECD data, we show that downward revisions are substantial, permanent, and mostly driven by supply shocks while PO estimates do not significantly react to demand shocks. In addition, revisions are partly caused by avoidable mismeasurement of PO before recessions. In particular, we show that the length of the preceding boom and prerecession values of the current account balance and credit volumes are predictors of post-recession PO revisions. Our results call for improved methods for estimating PO and provide evidence against the existence of substantial hysteresis following demand shocks.