Wednesday, July 31, 2013

All hail linear extrapolation

I didn't know there was going to be some prediction fun or I would have made a more explicit prediction. From this post however, I effectively predicted 1.8% RGDP growth until 2020 (barring any major monetary interventions). Before anyone says "Wow, that sounds awesomely close to the 1.7% figure reported today" let's make it clear that the average value of RGDP growth since 2010 has been 2.1% ... with the average since 2012 being 1.8% (effectively the linear extrapolation). Scott Sumner's and Mark Sadowski's also had on the order of 2% predictions, with the former predicting somewhat less due to the sequester (I gathered from the linked post that Sumner predicted 2% for 2013 overall, but Q2 would be less due to the sequester).

As Sumner notes in the linked post, these things get revised. If you take a look at the last figure in my prediction post, you can see that the model estimates and the real values have quite a bit of variability.

Anyway, the main point seems to be that not much has happened to the trajectory of the economy due to monetary and fiscal policy.


  1. A suggestion to better get your ideas across:

    Maybe you should have a glossary of your terms and for things like RGDP. (That one is easy probably "real" gross domestic "product")

    In an other one of your articles, I could not figure out what DEF on one of your graphs was and when I did a search in the article could not find DEF in the article.

    1. It stands for DEFlator as in the GDP deflator, but I use it generically to stand for the price level. I usually mention the specific price level I am using, but if not you should assume "core" PCE inflation.

      In my paper I give every specific time series name from the FRED database. So my paper is the main place to look (linked on the side bar or here if you are viewing on mobile device).


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