Thursday, March 26, 2015
Methodological changes in economic forecasting.
Forecasting failures over the past decade have accelerated methodological changes, moving away from point estimates towards a larger use of forecast ranges and alternative scenarios. More risk indicators have been added to forecasters' watch list, developing early warning signals. Given estimates for key economic determinants, many other variables' outcomes are predictable based on these key factors, thanks to the importance of dominant drivers and the slow-moving nature of some underlying trends. Forecasters are looking for better ways of predicting and assessing combinations of events that push outcomes beyond 'normal boundaries'.