Exact predictions of policy outcomes and estimates of the state of the economy are routine; expressions of uncertainty are rare. This column argues that with the US approaching the beginning of an administration, the incredible certitude of past governmental policy analysis will soon seem a minor concern relative to what lies ahead. Whereas analysis with incredible certitude makes predictions and estimates that are possibly true, analysis in a post-truth world makes predictions and estimates that are clearly false.
Charles Manski, 24 December 2016
Nauro Campos, 04 August 2016
On 23 June 2016, 52% of British voters decided the UK should leave the European Union, in a decision that went against the advice of most economists. This column assesses the quality of that advice, and argues that while gaps in knowledge may have hindered forecasts, Brexit can essentially be put down to three things: an unnecessary manifesto pledge by David Cameron, a lack of engagement by the City in the Remain campaign, and the pro-Brexit stance of some of the UK's major newspapers.
Graham Elliott, Allan Timmermann,
Policymakers use forecasting to attempt to assess the impact of major events, such as the recent Brexit vote, on the economy. While forecasting has improved dramatically in recent years, the models can still be greatly improved. This column discusses some of the limitations of forecasting models, and how policymakers can make their predictions more reliable. Key considerations are using more data to generate predictions, and using myriad models to eliminate individual misspecifications.
Hassan Afrouzi, Olivier Coibion, Yuriy Gorodnichenko, Saten Kumar, 13 October 2015
The importance of the general public’s inflation expectations is increasingly being emphasised, but surveys of firms’ expectations are notably absent. This column explores the extent to which inflation expectations of firms in New Zealand are anchored. The findings indicate that managers show little anchoring of inflation expectations, despite 25 years of inflation targeting by the central bank. Most managers depend to a large extent on their personal shopping experience to make inferences about aggregate inflation.
Patrizio Pagano, Massimiliano Pisani, 21 May 2010
The price of oil plummeted during the global crisis, but has since started to climb back. Which way will the oil price go next? This column presents a new risk-adjusted method for forecasting oil prices using the futures market. It suggests that oil prices may climb back to $100 by early next year – a level that may dampen consumption spending.