Understand economic forecasts

Author: David Hendry
Publisher:
Publish Date: 2003-10-01
Features: Historically, economic forecasting theories that support practice have been based on two assumptions: models are true representations of economic reality, and economic structures will remain relatively stable. However, the reality is that forecasting models are often inaccurate, and the real economy frequently experiences unexpected changes. Therefore, it is quite common that accurate predictions cannot be made. In the past decade, economists have developed new economic forecasting theories and more relaxed evaluation methods for forecasts. These theories and methods acknowledge that the economy is dynamic and prone to sudden shifts. Economists have also recognized that no matter how perfect a forecasting model is, it will be somewhat inaccurate to a certain extent due to the significant simplification of reality. One of the major contributions of these new methods is that we can now explain the different outcomes of various forecasts. In the chapters of this book, academic experts, practitioners, and financial journalists explain the new developments in economic forecasting. The author discusses how forecasting operations, evaluations, reporting, and applications are conducted by academic institutions, private institutions, and government agencies, as well as how to make forecasts and estimate the costs of forecast errors. Additionally, the author describes how to construct econometric models, how to analyze the characteristics of forecasting methods, and the prospects for economic forecasting.