I have often claimed that expectations of NGDP growth crashed in late 2008, and that this caused a crash in asset prices, which made the financial crisis much worse. Indeed it probably played a role in the demise of Lehman Brothers (although I don’t doubt that other factors relating to the subprime fiasco also played a role.)
Now Evan Soltas has found data that documents this sudden change in NGDP growth expectations:
I recently discovered that the Survey of Professional Forecasters has been recording NGDP expectations since 1968. Better yet for those inclined — that is, me — they have all of the individual anonymized forecast records, mean forecasts, median forecasts, and cross-sectional dispersion statistics on the forecasts. And it’s a quarterly forecast for several quarters ahead.
You can do a lot with this. I’ve actually never seen someone really work with Survey numbers to make the NGDP case, and this is only the tip of the iceberg. (I’m practically pleading with everyone else to write something.)
The first is a graph of mean NGDP expectations, with each line is a time series of expectations for NGDP percent growth one through five quarters out.
. . .
You can see the NGDP shock as a shock to expectations. Notice that the effects are noticeable for a full year out. It’s not hard to see how a sudden collapse of short-to-medium expectations, with no “bounce-back” recovery seen in the future, could be more important than current-quarter NGDP.
You should check out the various graphs in Evan’s post.