Economic Growth

Gross state product (GSP), which is the total market value of all newly produced final goods and services in a state over a given period of time, is often reported as a growth rate. Since the total market value is calculated in millions of dollars (usually in the value of a dollar at some point in the relative past) it is often too large in scale to appreciate. By expressing GSP as a percent change from the previous period we are better able to make direct comparisons through time relative to the past. Thus, the percent change is a measure of economic growth.

GSP Growth Rate

Below the percent change in GSP is expressed by the blue line1. The horizontal red line represents the long run growth rate of state GSP; it is the unconditional mean of the series. One can see that the long run growth rate is -0.02 percent, indicating that the Louisiana economy has not grown on average over the past 13 years.

By hovering over this plot, we see that the state economy as a whole did not feel the full effects of the national recession until well into 2010. The growth rate data appear to be relatively stationary (visually at least), reverting back to the long run average. This tends to imply that periods below the red line can reasonably be expected to follow periods above the red line. That is of course unless the fundamentals of the economy change.

Economic Growth Forecasts

Forecasts2 for Louisiana economic growth are made from an aggregation of multiple statistical models designed to approximate the underlying data generating process of the available data. A Bayesian model averaging approach is used here to capture the joint uncertainty that any given model may be misspecified as well as to capturing the probabilistic uncertainty inherent in each individual estimate.

Observed data is given in blue while forecasts are presented in orange. The weighted average of all models used is represented by the solid orange line. The upper bound and lower of the cone of uncertainty surrounding these estimates is represented by the dashed upper and lower lines respectively.

  1. Please note that the graphs below are interactive HTML widgets. Please hover over each to examine the underlying data that comprises them.

  2. Forecasts are provided as a convenience and for informational purposes only without any explicit or implied warranty. The authors and publishers of this post and site bear no responsibility for the information provided here and cannot be held liable for any negative consequences that may arise due its publication. Forecasting the future is inherently a tricky proposition, and all forecasts have an error term attached to them. Please exercise caution when making financial and business decisions based on the information provided. Use this information as a single input into your decisions making process.

Patrick is an assistant professor of Economics at Louisiana Tech University. He researches interest rate determination and the inflationary consequences of suboptimal monetary policy. He teaches monetary economics, research methods & macroeconomic theory.