National Institute Economic Forecasts 1968 to 1991: Some Tests of Forecast Properties

By Pain, Nigel; Britton, Andrew | National Institute Economic Review, August 1992 | Go to article overview

National Institute Economic Forecasts 1968 to 1991: Some Tests of Forecast Properties


Pain, Nigel, Britton, Andrew, National Institute Economic Review


Introduction

From time to time the Institute has published in the Review assessments of its economic forecasts based on statistical analysis of their relation with the outturn data. The most recent examples are Savage (1983) for GDP forecasts and NIESR (1984) for inflation. A more extensive analysis has now been carried out covering quarterly forecasts over the period from 1968 to 1991 for a range of economic variables. The full results are reported in Pain and Britton (1992). This note summarises some of the main findings.

At the present time there is particular concern over recent forecasting performance. In common with most other forecasters the Institute substantially underpredicted the strength of the economy in the late 1980s and also failed to foresee the onset and duration of the recent recession. This experience suggests the need to re-evaluate the conclusions of earlier studies of this kind.

In the next section of this note we discuss the Institute's forecasts of some key macroeconomic variables, illustrated with charts of forecast and outturn. The third section reports the main findings of the statistical analysis, which tests the efficiency and bias of the forecasts. It includes tests over the period as a whole and over three sub-samples. The fourth section considers the relationship between forecast errors and data revisions.

The results are consistent with earlier studies in showing that generally Institute forecasts are unbiased and contain information useful for prediction. This can be shown for the period as a whole, including the 1980s, and tests for a deterioration in the forecasts in recent years are not conclusive. Nevertheless the results for some key variables in recent years are disappointing. It would appear that forecasting has become substantially more difficult, probably because of shifts in underlying behavioural relationships which have not yet been fully incorporated into econometric models.

National Institute forecasts

This study focuses on National Institute forecasts of the annual growth in real expenditure, inflation, average earnings, employment and real personal disposable income. We examine both aggregate measures, such as Gross Domestic Product and domestic demand, and individual components of expenditure. The forecasts are all for growth between two particular quarters. This provides a stricter test of forecasting performance than the use of forecasts for growth in a calendar year since the latter contain an important element of estimated outturn.

The forecasts are taken from successive quarterly issues of the National Institute Economic Review over the period from 1968Q1-l990Q2(1). We treat the forecasts as a consistent set even though the structure of the Institute's domestic macroeconometric model has changed considerably over time, with advances in econometric techniques, economic theory, the extent of sectoral disaggregation and the treatment of expectations.

Previous studies of the Institute forecasts have considered a narrower range of variables over a smaller sample period. For example, Holden and Peel (1985) looked at real expenditure and inflation forecasts over the second half of the 1970s alone. Use of a wider range of variables and a larger sample enables us to ask whether forecasting performance has changed over time and whether any observed forecasting difficulties arise from particular variables.

The optimal base point for the annual growth forecasts is determined by the |lnformation lag' - the time between the last available published outturn data and the time at which the forecast is undertaken. In general a forecast for time t can be thought of as being made at time t-i based on information up till t-i-j, where j is the information lag. In the UK the typical information set consists of full information for t-i-2, plus partial information for t- i- 1 and some early (usually financial) information for t-i. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

National Institute Economic Forecasts 1968 to 1991: Some Tests of Forecast Properties
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.