Working Papers

The US Recession that Isn’t

US Q1 GDP is given a 69% chance of being positive, according to last trade prices on prediction market Intrade (contract expiry is based on the final GDP release, not today’s advance release).  Intrade pricing suggests a better than even chance that US GDP growth will be positive for every quarter in 2008.  The chance of a recession in 2008 is put at 44.9%, with recession defined as two consecutive quarters of negative GDP growth for the purposes of contract expiry.  The absence of recession on this definition would not necessarily preclude a recession being declared based on the NBER Business Cycle Dating Committee’s methodology.

posted on 30 April 2008 by skirchner in Economics, Financial Markets

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So ... are you going out on a limb and saying there won’t be a recession in the US?  That’s a very brave call when you see data like this.

Posted by .(JavaScript must be enabled to view this email address)  on  04/30  at  04:09 PM

There will likely be an NBER-defined recession, but not one based on the more commonly accepted definition used by Intrade.

Posted by skirchner  on  04/30  at  04:54 PM

Well I hope you’re right.  My livelihood depends on the strength of the US economy.  I’d like nothing more than to see rising interest rates in the US, a strong USD, and an end to this interminable resources boom.

I’m sure you’re in lock-step with Joe Stiglitz on most issues (not!) because he says the recession will be long and deep.

Stiglitz won the Nobel Prize in Economics.  Who am I to believe?  I guess we’ll know in a few months.

Posted by .(JavaScript must be enabled to view this email address)  on  04/30  at  05:18 PM

Kirchner 1, Stiglitz 0

Phew! The news from the US recently has been so unremittingly awful you’d think the world was ending.

Perhaps this is a case of the contagion from the finacial sector has yet to spread to the so-called “real economy”?

Posted by .(JavaScript must be enabled to view this email address)  on  05/01  at  01:02 PM

The paradox of recession forecasting is that the more widely a recession is anticipated, the less likely it is to occur, because policymakers and the public take pre-emptive action.  It’s the recession no one sees coming you have to worry about the most.

Posted by skirchner  on  05/01  at  01:41 PM

FYI: Joe Stiglitz was on Lateline last night repeating much of what he said in the CNBC interview.

Interestingly, Tony Jones uttered the phrase “Hubbert’s Peak” during the interview which is yet another example of peak oil entering mainstream consciousness.

Imagine a world where 90% of the population believes in both global warming and peak oil.  That must be a nightmare scenario for you Stephen!

Posted by .(JavaScript must be enabled to view this email address)  on  05/06  at  09:56 AM

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