Finally, for Norway, where the univariate forecast is consistently below actual output, including the actual evolution of distress makes the forecast errors even larger. Based on the fact that Norway had a relatively severe panic, with a second acute phase a year after the first, the forecast including the evolution of the distress variable is quite weak for nearly two years. Yet actual output barely paused. This suggests that the behavior of distress provides little insight into the behavior of the Norwegian economy in this period.
The bottom line of the analysis of this section is that there is substantial variation in the behavior of output following financial distress. The severity and persistence of this distress in particular episodes appears to explain much, but certainly not all, of this variation.