Economic forecasting

For related topics, see Forecasting.

Economic forecasting is the process of making predictions about the economy. Forecasts can be carried out at a high level of aggregation - for example for GDP, inflation, unemployment or the fiscal deficit - or at a more disaggregated level, for specific sectors of the economy or even specific firms.

Many institutions engage in forecasting, including international organisations such as the IMF or the OECD, national governments and central banks, and private sector entities, be they think tanks, banks or others. Some forecasts are produced annually, but many are updated more frequently.

Consensus Economics Inc., among others, compiles the macroeconomic forecasts prepared by a variety of forecasters, and publishes them every month. The Economist magazine regularly provides such a snapshot as well, for a broad range of countries (a recent example is provided here).

The financial and economic crisis that erupted in 2007 - arguably the worst since the Great Depression of the 1930s - was not foreseen by most of the forecasters, even if a few lone analysts had been crying wolf for some time (for example, Nouriel Roubini and Robert Shiller). The failure to forecast the "Great Recession" has caused a lot of soul searching in the profession. The Queen of England herself asked why had nobody noticed that the credit crunch was on its way, and a group of economists - experts from business, the City, its regulators, academia, and government - tried to explain in a letter.

Methods of forecasting include Econometric models, Economic base analysis, Shift-share analysis, Input-output model and the Grinold and Kroner Model.

See also Land use forecasting, Reference class forecasting, Transportation planning, Calculating Demand Forecast Accuracy and Consensus forecasts

References

• IMF forecasts can be found here: IMF World Economic Outlook and OECD forecasts here: OECD Economic Outlook
• Two of the leading journals in the field of economic forecasting are the Journal of Forecasting and the International Journal of Forecasting
• For a comprehensive but quite technical compendium, see Handbook of Economic Forecasting, North-Holland: Elsevier, 2006
• A more compact and more accessible, but pre-crisis overview is provided in Elements of Forecasting, 4th edn, Cincinnati, OH: South-Western College Publishing, 2007
• A recent, comprehensive and accessible guide to forecasting is Economic Forecasting and Policy, 2d edn, Palgrave, 2011

External links

• International Institute of Forecasters