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date: 17 November 2019

Abstract and Keywords

This article poses three questions: Where did the forecasting models go wrong? Who's to blame for the forecast errors? and How can [state and local] revenue estimation improve? To answer all three, the article starts out with a look at just how severe the 2007–2009 recession was, and then empirically examines how five common features of revenue-estimating models were affected by the second longest business-cycle contraction of the past eighty years. The Great Recession (eighteen months, peak to trough) was the most severe decline of any recession since the Great Depression of 1929–1933 (which lasted forty-three months). The article carefully works through each of the key indicators that a state revenue estimator watches, and it demonstrates that not only was the Great Recession dramatically deep (the last time all six major indicators contracted was 1948–1949, and even that was of shorter duration) but also that it has been very different than prior recessions.

Keywords: revenue estimation, forecasting models, recession, business-cycle contraction, state revenue, economic indicators

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