The Models and Methodology of Forecasting

By Dauffenbach, Robert | THE JOURNAL RECORD, January 4, 1999 | Go to article overview

The Models and Methodology of Forecasting

Dauffenbach, Robert, THE JOURNAL RECORD

Frequently in the news one hears reports of this or that bank or federal or international agency reducing their economic forecasts. Typically in these revised forecasts the nation is predicted to grow at a still positive, although much reduced, rate.

At the University of Oklahoma Center for Economic and Management Research, we closely follow the forecasts from the Fair Model, created by Yale economist Ray C. Fair and available free of charge at the Web site

These forecasts are used as inputs to our indicator-based approach. The real gross domestic product historical data and forecasts, as shown in the GDP table, reveal just how vibrant growth has been since 1995 and extent of the expected decline in that growth rate in the forecast period. Note that the annualized percent change in real GDP has been has high as 6.1 percent since 1995. For 10 of the most recent quarters, growth has exceeded rates that Chairman Alan Greenspan and the Federal Reserve Board of Governors view as unsustainably high without inducing increases in inflation. The Fed generally regards any rate greater than 2 percent as unsustainably high. Fair's forecast shows that the Fed's concerns for too high growth are soon to be alleviated. His results have the U.S. economy growing at only a 0.5 percent rate in the quarter immediately ahead. For 1999, growth by his model is expected to average only about 0.8 percent. It will take until the year 2001 to return to respectable growth rates. To be sure, Fair's results are on the low side of most forecasts for 1999 and beyond. But it is significant that Fair decreased his forecast for 1999 by almost a full percentage point from his prior forecast, just three months ago. If the Fair Model forecasts materialize, there will be repercussions on the Oklahoma economy. We have noted in our publications the greater diversity of growth and the renewed dependency of the Oklahoma economy on continuing national economy growth for its well being. Problems in agriculture and energy markets accentuate the reliance of the Oklahoma economy on the nation for its growth impulses. For Oklahoma to keep growing, we need the nation to keep growing. Behind the indicators The focus of this article will be somewhat different from the typical spouting of economic statistics and forecasts, although such diversions can scarcely be avoided. The hope is to convey the motivation and rationale that underscore the Price College Indicators. These indicators debuted in the 70th anniversary publication of the Oklahoma Business Bulletin in January 1998. The indicators form the core of a forecasting strategy that we use to make economic forecasts. Business cycle research and economic indicators have a long history in economic research. Analysts in this research domain include many famous scholars, Nobel prize winners and former chairs of the Federal Reserve. Examples include works by Burns, Hall, Hansen, Hildebrand, Kindleberger, Lucas, Mitchell, Moore, Schumpeter, Tinbergen, Volcher and Zarnowitz. These are hardly household names to the average citizen, but students of economics know them well. Interestingly, Arthur Barto Adams, founding dean of the OU College of Business Administration and initial publisher of the Oklahoma Business Bulletin, was an early author on the subject. His book Economics of Business Cycles was published in 1925 by McGraw-Hill. He remained active in this area over the years. In 1950 he published Business Cycles: Their Causes and Control. Our current research, then, rests on a long tradition at OU. There are several rationale for undertaking construction of a new series of economic indicators. The financial press, of course, devotes significant attention to every morsel of economic news. The stock market and interest rates rise and fall on each new announcement of housing starts, consumer sentiment, retail sales, gross domestic product, trade deficits, growth in jobs and unemployment rates. …

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

Items saved from this article

This article has been saved
Highlights (0)
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.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Cite this article

Cited article

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

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25,

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

Cited article

The Models and Methodology of Forecasting


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?

Full screen

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

    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, 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."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25,

    New feature

    It is estimated that 1 in 10 people have dyslexia, and in an effort to make Questia easier to use for those people, we have added a new choice of font to the Reader. That font is called OpenDyslexic, and has been designed to help with some of the symptoms of dyslexia. For more information on this font, please visit

    To use OpenDyslexic, choose it from the Typeface list in Font settings.

    OK, got it!

    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.

    Author Advanced search


    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.