Everyone wants to think that this recession is “special”.
What if it isn’t? How do we justify all of our panic and bizarre policies this go round if this recession is pretty much like all the others.
What he does is take us back to 2007 III, and forecast GDP out into the future. If you don’t know anything about the price of oil in the future, you’d forecast the economy to go up. But … if you include information about the huge run-up in oil prices … you’d predict a recession that matches up with ours fairly well.
This doesn’t constitute a proof, but it lends a lot of credence to the idea that we’re not seeing anything unusual at all, given that oil prices quadrupled in the space of a few years.
* Hamilton is on a lot of folks “medium-list” for a Nobel Prize. He was the first to put together a model in which business cycle turning points were unpredictable. This doesn’t make that a fact; but the usual assertion of non-economists that “someone should have predicted this” is vacuous unless it can be compared to a situation in which no can predict turning points. Once we had that in hand (after 1989) it became pretty obvious to macroeconomists that it would be really hard to dismiss the idea that they can’t be predicted at all.