Advances in Economic Forecasting

Advances in Economic Forecasting

Advances in Economic Forecasting

Advances in Economic Forecasting

Synopsis

This book is based on lectures the authors gave at Western Michigan University as part of the 2009/2010 Werner Sichel Lecture Seminar Series.

Excerpt

Matthew L. Higgins Western Michigan University

The six chapters that follow this introduction are based on lectures the authors gave at Western Michigan University as part of the 2009– 2010 Werner Sichel Lecture Seminar Series, organized under the same title as the present volume. The lectures were given over an academic year during a time when the U.S. economy was just beginning to recover from the “Great Recession.” The economics profession’s inability to predict this catastrophe may have seemed like an inauspicious background for a lecture series on economic forecasting. However, the economic distress and surrounding uncertainty actually benefited the series because they heightened interest in the topic of economic forecasting. The question-and-answer sessions following each lecture revealed that some audience members had a healthy skepticism of economists’ ability to ever predict the future course of the economy. I think, however, that each speaker’s candid and realistic assessment of opportunities to improve economic forecasting left most attendees with some sense of optimism.

Several common recommendations emerge from the following six chapters for improving the reliability of economic forecasts. Authors Dean Croushore, Kajal Lahiri, and H.O. Stekler all emphasize that improvements in forecasting will require proper evaluation of the performance of forecasting methods, focusing particularly on the ability of methods to forecast in real time and predict turning points in major macro aggregates. David E. Rapach and Tae-Hwy Lee, in their chapters, argue that the abundance of economic data can be more efficiently exploited through model and forecast combination. Rapach, Lee, and coauthors Michael D. Bradley and Dennis W. Jansen each advocate using models that are adaptive and perform well in the presence of nonlinearity and structural change. Below, I briefly summarize each author’s chapter to help direct the reader to these specific themes.

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