Rapid growth in emerging markets and developing economies: Now and forever?

Giang Ho, Paolo Mauro 12 September 2014

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Projecting a country’s economic growth into the medium term and beyond is notoriously difficult. At the same time, getting the growth projections wrong has major adverse consequences. For fiscal policymakers, overestimating future economic growth implies underestimating the government debt-to-GDP ratio that will be reached at the end of the projection period (in the absence of corrective policy measures).

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Topics:  Development Macroeconomic policy

Tags:  optimism bias, forecasting, growth, IMF, World Bank

Model risk and the implications for risk management, macroprudential policy, and financial regulations

Jon Danielsson, Kevin James, Marcela Valenzuela, Ilknur Zer 08 June 2014

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Risk forecasting is central to macroprudential policy, financial regulations, and the operations of financial institutions. Therefore, the accuracy of risk forecast models – model risk analysis – should be a key concern for the users of such models. Surprisingly, this does not appear to be the case. Both industry practice and regulatory guidance currently neglect the risk that the models themselves can pose, even though this problem has long been noted in the literature (see for example Hendricks 1996 and Berkowitz and O’Brien 2002).

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Topics:  Financial markets

Tags:  financial crises, financial regulation, forecasting, risk management, Macroprudential policy

“There will be growth in the spring”: How well do economists predict turning points?

Hites Ahir, Prakash Loungani 14 April 2014

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Since the onset of the Great Recession, much of the world has been in a state of economic winter: nearly 50 countries were in recession in 2009 and 15 countries slipped into recession in 2012. After weak global growth in 2013, economic forecasters are predicting a rosier outlook this year and next. Can these forecasts be trusted? Or are forecasters simply intoning – like Chauncey Gardner, the character played by Peter Sellers in the movie Being There – that “there will be growth in the spring”?

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Topics:  Global crisis

Tags:  recessions, forecasting

Are exchange rates predictable?

Barbara Rossi 14 November 2013

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The predictability of exchange rates is a crucial question in international finance and macroeconomics. Policy decisions of central banks and policymakers all over the world rely, directly or indirectly, on exchange rate forecasts. The same holds for private business and practitioners' decisions. Discussions in policy circles and forecasting businesses often revolve around the difficult theme of forecasting exchange rates, as the recent discussions about currency wars and international monetary-policy coordination during the recent financial crisis have shown.

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Topics:  Exchange rates

Tags:  exchange rates, random walk, predictions, forecasting

Should the role of preparing budgetary projections be delegated to an independent agency?

Rossana Merola, Javier J. Pérez 01 May 2013

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The debate about fiscal forecasts has recently been growing more intense in Europe. At its root, there is the evidence of planned government deficits significantly exceeding recurrent budgetary plans in recent years. This comes at a time of high public deficit and debt levels for EU member states. Explanatory factors for these misalignments include large GDP shocks and fiscal-stimulus packages adopted on the run. Beyond these explanations, there is also a distinct lack of both transparency and realistic accounts of the facts.

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Topics:  Global crisis Monetary policy

Tags:  fiscal policy, forecasting, Eurozone crisis

Federal Open Market Committee forecasts: Guesses or guidance?

Peter Tillmann 23 February 2012

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Topics:  Macroeconomic policy Monetary policy

Tags:  inflation, monetary policy, transparency, Federal Reserve, forecasting, Federal Open Market Committee

Macroeconomic model comparisons and forecast competitions

Volker Wieland, Maik Wolters 13 February 2012

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The failure of economists to predict the Great Recession of 2008–09 has rightly come under attack. The areas receiving most criticism have been economic forecasting and macroeconomic modelling. Distinguished economists – among them Nobel Prize winner Paul Krugman – have blamed developments in macroeconomic modelling over the last 30 years and particularly the use of dynamic stochastic general equilibrium (DSGE) models for this failure.

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Topics:  Frontiers of economic research Macroeconomic policy

Tags:  DSGE models, forecasting

New tools for forecasting the real price of crude oil

Lutz Kilian 23 June 2011

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The real (inflation-adjusted) price of crude oil is a key variable in the macroeconomic projections generated by central banks, private sector forecasters, and international organisations (IMF 2005, 2007). The recent cutback in Libyan oil production, widespread political unrest in the Middle East, and ongoing concerns about the state of the global recovery from the financial crisis have sharpened awareness of the uncertainty about the future path of the real price of crude oil.

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Topics:  Energy

Tags:  Crude oil, forecasting

Dynamic stochastic general equilibrium models and their forecasts

Refet S. Gürkaynak, Rochelle M Edge 28 February 2011

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Topics:  Macroeconomic policy Monetary policy

Tags:  forecasting, macroeconomic theory, Dynamic stochastic general equilibrium models

How should we make economic forecasts?

J James Reade, David F. Hendry 11 June 2009

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A vital challenge confronting economists is how to forecast. The task is yet more exacting but ever more pertinent during a recession because livelihoods seem to depend on forecasts – will unemployment fall soon enough to stave off foreclosures?

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Topics:  Frontiers of economic research

Tags:  forecasting, autometrics, general-to-specific model searches, model averaging

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