On the optimal use of forecasts in economic policy decisions by Leif Johansen

Cover of: On the optimal use of forecasts in economic policy decisions | Leif Johansen

Published by Institute of Economics, University of Oslo in [Oslo] .

Written in English

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Subjects:

  • Economic forecasting -- Mathematical models.,
  • Economic policy -- Mathematical models.

Edition Notes

Book details

Statementby Leif Johansen.
SeriesMemorandum - Institute of Economics, University of Oslo
Classifications
LC ClassificationsHD82 J5816
The Physical Object
Pagination23 leaves. --
Number of Pages23
ID Numbers
Open LibraryOL18820541M

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COVID campus closures: see options for getting or retaining Remote Access to subscribed contentCited by:   North-Holland Publishing Company OPTIMAL USE OF FORECASTS IN ECONOMIC POLICY DECISIONS An empirical test Tor HERSOUG and Leif JOHANSEN Institute of Economics, University of Oslo, Oslo, Norway Received Decemberrevised version received April A criterion for optimal use of forecasts of exogenous variables in a linear policy model with Cited by: 5.

Economic Forecasting and Policy (Second Edition) is the perfect book for the task. Written lucidly and intelligently by three well-known economists from the French Treasury, the OECD, and the BIS (one of the few institutions to have "called" the global financial crisis), this book provides both underlying theory and much practical by: Abstract Policymakers use forecasts to project the consequences of particular policy decisions for certain policy targets.

This chapter investigates the use of economic forecasting in policy making. Research on forecasting methods has made important progress over recent years and these developments are brought together in the Handbook of Economic Forecasting.

The handbook covers developments in how forecasts are constructed based on multivariate time-series models, dynamic factor models, nonlinear models and combination methods. The handbook also includes chapters on forecast. The highly prized ability to make financial plans with some certainty about the future comes from the core fields of economics.

In recent years the availability of more data, analytical tools of greater precision, and ex post studies of business decisions have increased demand for information about economic forecasting.

Volumes 2A and 2B, which follows Nobel laureate Clive Granger's Volume 1. monetary, fiscal, or other public policy may serve to move the actual closer to the desired value. Empirical Earccast.s Methods of economic forecasting may be divided in-to two major classes.

One class uses primarily an em-pirical approach, while the other class combines economic theory with empirical evidence. The best. Forecast ranges. It may be wise to develop a range of possible forecast outcomes, with the use of different scenarios.

Multiple projections should be a part of a well-planned and thoroughly discussed approach. Use Forecasts. The purpose of a forecast is to inform and assist in decision-making.

model has policy only affecting long run inflation. The Neo-Keynesian has policy impacting inflation, unemployment, and real wages. The Post-Keynesian model also impacts growth, so policy implicitly picks a quadruple. Inflation targeting is a sub-optimal policy frame because it biases decisions toward low inflation by obscuring the.

A n econometric model is one of the tools economists use to forecast future developments in the economy. In the simplest terms, econometricians measure past relationships among such variables as consumer spending, household income, tax rates, interest rates, employment, and the like, and then try to forecast how changes in some variables will affect the future course of others.

decisions a ecting others: Social Choices. I EPA is the toolkit to understanding social choices I Some of you may well end up working for/in a public administration: Here you are going to learn critical insights about a wide range of economic policies (taxes, education policies, social insurance, etc.), but also about how gvt/public administration.

While current economic forecasts may still seem to some to be mystically derived, today’s economic forecasters tend to rely more on data, computer models, and economic theories rather than divine inspiration although, given the accuracy of their forecasts compared to Joseph’s, one might question the change in tactics.

Economic forecasts are geared toward predicting quarterly or annual GDP growth rates, the top-level macro number upon which many businesses and governments base their decisions. Announcements and the Role of Policy Guidance Carl E.

Walsh∗ Preliminary draft: October 2, Abstract By providing guidance about future economic developments, cen-tral banks can affect private sector expectations and decisions. This can improve welfare by reducing the effects of asymmetric information and by leading to smaller forecast.

III.A NEW APPROACH TO THE THEORY OF ECONOMIC POLICY 13 A. Basic Structure of Economic Policy Problems 13 B. Intertemporal Efficiency and the Principle of Optimality 17 C.

The Existence of an Optimal Policy 23 D. Methods of Finding the Optimal Policy 31 1» Some useful transformations 32 2, fontryagin's maximum principle 37 3. Journal of Economic Perspectives—Vol Number 1—Winter —Pages – T he US government is a major producer of economic and financial data, statistics, analysis, and forecasts that are gathered, compiled, and published as public goods for use by citizens, government agencies, researchers, nonprofits, and the business community.

Economists rely on economic theories, or models, to analyze real-world issues. Economic models are simplified versions of reality. One purpose of economic models is to make economic ideas sufficiently explicit and concrete so individuals, firms, or the government can use them to make decisions.

Economists use economic models to answer questions. Governments can use macroeconomic policy including monetary and fiscal policy to stabilize the economy. Central banks use monetary policy to increase or decrease the money supply, and use. The U.S. economic outlook is a U-shaped recession for and beyond.

See updated forecasts for interest rates, growth, job creation, and gas prices. A fuller understanding of the public's learning rules would improve the central bank's capacity to assess its own credibility, to evaluate the implications of its policy decisions and communications strategy, and perhaps to forecast inflation.

Realistically calibrated models with learning would also inform our thinking about policy and the economy. Managerial Economics applies micro-economic tools to make business decisions.

It deals with a firm. The use of Managerial Economics is not limited to profit-making firms and organizations. But it can also be used to help in decision-making process of non-profit.

The economic programme encapsulates the decisions and policy choices that people make with respect to using resources today or saving them for the future—realized intertemporal exchange. (i) Conceptual issues. The economic programme may be thought of as a model of behavioural ‘inputs’ into the production of service flows.

Start studying Chapter 1. Learn vocabulary, terms, and more with flashcards, games, and other study tools. 4 explain why we should expect the pattern of such errors to vary over time. However, we find pattern of qualitative similarity of forecasting errors associated with policy decisions over (i) at long horizons (i.e.

over 3 quarters) inflation forecasts underestimated or overestimated events. Purchasing managers: Improve raw-material price forecasts and adjust negotiating strategies to lock in longer-term pricing agreements during periods of economic slowdown when material prices tend to be lowest.

Policy analysts: Use these information-laden reports to guide your economically sensitive policy decisions. Notably, we now appreciate that policy decisions under uncertainty must take into account a range of possible scenarios about the state or structure of the economy, and those policy decisions may look quite different from those that would be optimal under certainty.

are used for monetary policy decisions.5 Thus we focus on the Greenbook forecasts in this paper. We use methods previously applied to measuring the impact of monetary policy on the economy in order to measure the impact of forecast errors.

If the forecast errors are exogenous to economic events then they should be a valid shock measure. Robust optimal decisions with imprecise forecasts Computational Statistics & Data Analysis, Vol.

51, No. 7 A hybrid SARIMA and support vector machines in forecasting the production values of the machinery industry in Taiwan. ’s building on the foundation of Markov decision processes which was introduced in the ’s (in fact, the rst use of the term \stochastic optimal control" is attributed to Bellman, who invented Markov decision processes).

Reinforcement learning emerged from computer science in the ’s. Structural change: The optimal forecasting model may change over time, and if the change is unaccounted for, that will lead to poor forecasts. For. (With Peter Zweifel) "Exploiting linear partial information for optimal use of forecasts with an application to U.S.

economic policy, International Journal of Forecasting, E. Kofler's work from "Forecasting and Stability under Fuzzy Information". Opportunities for Economic Policy. The potential uses of big data for economic policy roughly parallel the uses in the private sector.

In this section, we start by describing the data resources available to the government, and also how private sector data might be used to better track and forecast economic activity.

Economists apply econometric tools in a variety of specific fields (such as labor economics, development economics, health economics, and finance) to shed light on theoretical questions. They also use these tools to inform public policy debates, make business decisions, and forecast future events.

Following is a list of ten interesting, practical applications of econometric techniques. [ ]. Downloadable. "Forecast targeting", forward-looking monetary policy that uses central-bank judgment to construct optimal policy projections of the target variables and the instrument rate, may perform substantially better than monetary policy that disregards judgment and follows a given instrument rule.

This is demonstrated in a few examples for two empirical models of the U.S. economy, one. The regional economy is forecast to recover well in from this year’s sharp contraction, with domestic demand set to be buoyed by an uptick in consumer and capital spending.

However, the spike in Covid cases in Europe and the U.S. casts a shadow over the outlook, potentially dragging on regional exports to key markets at the outset of.

The economic forecasts are in forand there are mixed views about whether the economy will turn the corner this year. The consensus among. This paper constructs hybrid forecasts that combine both short- and long-term conditioning information from external surveys with forecasts from a standard fixed-coefficient vector autoregression (VAR) model.

The forecast accuracy gains for inflation are substantial, statistically significant, and are competitive with the forecast accuracy from both time-varying VARs and univariate benchmarks.

Salvatore Nisticò, OPTIMAL MONETARY POLICY AND FINANCIAL STABILITY IN A NON‐RICARDIAN ECONOMY, Journal of the European Economic Association, /jeea, 14, 5, (), (). Wiley Online Library. Monetary Policy with Judgment: Forecast Targeting Lars E.O.

Svensson NBER Working Paper No. March JEL No. E42, E52, E58 ABSTRACT "Forecast targeting," forward-looking monetary policy that uses central-bank judgment to construct optimal policy projections of the target variables and the instrument rate, may perform substantially.

The authors also describe the optimal Taylor rule for monetary policy in an estimated model of the economy of the euro-area. Their model is based on the simple aggregate supply and aggregate demand structure in Rudebusch and Svensson () with the important addition that potential output is not known to the policymaker in real time with.

economic policy uncertainty strengthens peer effects on investments. In this paper, I propose a reputation-based theory and information-based theory to support the findings.

Peer effects are stronger for less successful firms and financial constrained firms during periods when economic policy uncertainty is notable.

Accordingly, I use four.This article offers some immediate reflections on the state of the economy in the run-up to the vote, on the forecasts of economists during the campaign, and on the changes to policy since. The lack of an immediate recession has been taken as evidence that the economics was wrong, but it is not evidence that leaving the EU will be economically.Policy brief: Economic forecasts just one piece of the revenue puzzle.

The next Nebraska Economic Forecasting Advisory Board meeting is Friday and the board’s action will likely cause a reaction in the State Capitol.

Oftentimes, the board’s actions are followed by calls for tax cuts or increased spending.

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