Results from Estimating and Projecting Trends for Recent Recessions

Seeking evidence on the duration of aggregate demand shocks, this chapter estimates trends for the natural logs of total U.S. real GDP and per capita U.S. real GDP. This chapter uses simplistic estimates of trend, with only (a) an intercept or a constant, (b) a time trend multiplied by a coefficient, and (c) an error term or a residual as the only variables on the right side of the regression equation, with somewhat more complex regression equations that are sensitive to standard regression assumptions in later chapters. Trend equation estimates differ based on the starting and ending quarters. The body of this chapter has results focusing mainly on whether U.S. total real GDP and U.S. per capita real GDP returned to pre-recession trends after the dot-com-bubble recession and the Great Recession. Most of the discussion of other recessions appears in the online-only appendix. Using this simplistic estimate of trend, U.S. total real GDP and U.S. per capita real GDP often though not always failed to return to pre-recession trends after the onsets of recessions regardless of whether the recessions were caused by aggregate demand shocks or aggregate supply shocks.