Okay, I got a few "vintages" of Potential GDP from ALFRED, going back as far as 1991. I got 1991, I got every five years from 1995 to 2010, and I got 2013.

These are "real" values, inflation adjusted values. And as it turns out, there are all different measures of correction-for-inflation used for the various vintages. The README page in the ALFRED file says the 1991 series uses 1982 dollars; the 1995 series uses 1987 dollars; the 2000 series uses 1996 dollars; the 2005 series uses 2000 dollars; and the 2010 and 2013 series use 2005 dollars.

Why make it simple, right?

The first thing I want to do is convert everything to the same dollars, so that when I put them on a graph it's apples-to-apples. I did the work in a Google Drive spreadsheet this time.

I got quarterly data, but the vintage series are expressed in dollars of some year, not some quarter. So I'm taking an average of quarterly values for each base year value that I will need.

I'm using the current GDP Deflator values to convert the vintages. For example, for the data given in 1982 dollars I'm dividing by the 1982 value of the current Deflator series and multiplying by the 2005 value of the current Deflator series. For data given in 1987 dollars I'm dividing by the 1987 value of the current Deflator series, and like that. So I end up with everything in 2005 dollars, based on the most recent data on prices.

(I tell you these things because my method makes sense to me, but I don't know if it would make sense to economists or to others.)

Here's the graph:

Graph #1: From the "In Uniform Dollars" Sheet of this Google Drive Spreadsheet |

Those two series, by the way, were based on economic performance and economic thinking

*before*the macroeconomic miracle of the latter 1990s. By the year 2000, evidently, economists had factored the "miracle" years into their thinking. All of the Potential GDP series shown for the year 2000 and after group together at a much higher performance level than the 1991 and 1995 series.

Were the numbers influenced by the improved economic performance? I would say so, yes. If you put your mouse cursor on the red line and follow it back to where it joins the others, you can see that the numbers changed as far back as 1982. The 1995 prediction still shows no performance improvement, but the 2000 prediction shows a performance improvement that goes all the way back to 1982!

The four later series that all showed improved economic performance through the 1980s and 1990s suddenly break apart in the mid-2000s. You can see the little golden stub of the 2000 series in the crotch there where the others veer apart. That golden stub stops too soon, but the next estimate by date, the 2005 estimate -- green -- runs even higher than the 2000 estimate, and shows no indication of weakening.

That estimate, the green one, was made

*before*the global financial crisis.

The next estimate, the purple one, made after the onset of the global financial crisis, is as much lower than the golden stub as the green line is above it. And what could have caused this change?

The global financial crisis, perhaps?

The most recent estimate of potential GDP, the 2013 estimate, is lower yet. And I think you can see it lower than the others as far back as 2005 -- two or three years

*before*the crisis.

Isn't that odd?

## 4 comments:

I took the data from your G Drive file, put it into Excel and regraphed it as log.

I than made a composite of the various series in a couple of different ways. 1) By taking data from the various series, one at a time, to make a reasonably smooth curve, and 2) averaging the series values for each date.

Either way, on log scale, I get a curve with decreasing slope over time. I put a best fit polynomial trend line through each and got R^2 >.99.

Formula for the averaged version is

Y = -0.0001x^2 +0.4829x -.510.22

Where x is the numerical date [not Excel date scheme] for the middle of a quarter. Frex, first x value is 1948.125.

Even viewed as a potential, GDP growth has slowed over time.

Our economy is dying.

Alas,

JzB

Sad, isn't it. I was thinking about looking at growth in these numbers (you beat me to it!) because the

laterseries showfasterincrease after 1982, but I know that RGDP growth was faster in the decades before 1982 than the decades after. Your results quell the disturbance in my brain.Your results quell the disturbance in my brain.I don't believe anyone has ever said that to me before.

Happy Thanksgiving!

JzB

And Happy Thanksgiving to you Jazz!

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