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100th Issue of the Review : Forecasting and Economic Policy

Published online by Cambridge University Press:  26 March 2020

David G. Mayes
David G. Mayes*
Affiliation:
University of Exeter
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Extract

In recent years economic forecasting has come under increasing attack for two main reasons. The first is that since 1973 the economic outlook for the United Kingdom has been worse than most people in the economy would have liked. As the purveyors of bad tidings, economic forecasters have been thought, albeit largely unconsciously, to bear some responsibility for the outcome they expect. It is implied that if it is possible to point out the dire consequences of any current policy it should be equally possible to point to a better alternative policy, and hence enable the policymaker to avoid the undesirable outcomes. This very plainly has not happened; judged by the criteria of economic growth, price inflation and unemployment the United Kingdom has done worse since 1973 than in any period of comparable length since the second world war. Indeed comparisons have been made between the last few years, 1979–81, and those of the slump in 1929–33. On that occasion, however, there was no corresponding fear of rising prices. The second source of attack has been on grounds of accuracy. Despite the great advances in technique and the considerably enhanced complexity of macroeconometric models, forecast errors have not fallen markedly during the last decade and have in some instances increased.

Type
Articles
Information
National Institute Economic Review , Volume 100 , May 1982 , pp. 17 - 21
Copyright
Copyright © 1982 National Institute of Economic and Social Research

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References

(note 1 in page 17) Notwithstanding the change to floating exchange rates in the 1970s.

(note 2 in page 17) As an example see, G. D. N. Worswick, ‘What caused the recession?’, Bank of England, a paper presented to the Panel of Academic Consultants, no. 15, July 1981.

(note 3 in page 17) Third Report for the session 1979-80.

(note 1 in page 18) K. Cuthbertson, ‘The measurement and behaviour of the UK savings ratio in the 1970s’, National Institute Economic Review, no. 99, February 1982.

(note 2 in page 18) K. Cuthbertson, S. G. B. Henry, D. G. Mayes and D. Savage ‘Modelling and forecasting the capital account of the balance of payments: a critique of the reduced form approach’, National Institute Discussion Paper, no. 37.

(note 3 in page 18) See S. Brooks, ‘Systematic econometric comparisons: exports of manufactured goods’, National Institute Economic Review, no. 97, pp. 67-80, August 1981.

(note 1 in page 20) See for example D. G. Mayes ‘The controversy over rational expectations’, National Institute Economic Review, no. 96, May 1981.

(note 2 in page 20) See W. H. Buiter, ‘The superiority of contingent rules over fixed rules in models with rational expectations’, Economic Journal, pp. 647-70, September 1981.

(note 3 in page 20) F. E. Kydland and E. C. Prescott, ‘Rules rather than discretion: the inconsistency of optimal plans’, Journal of Political Economy, vol. 85, pp. 473-91, June 1977.

(note 4 in page 20) Kydland and Prescott, op. cit.

(note 5 in page 20) See for example S. G. B. Henry and D. G. Mayes, ‘Experi ments in the control of a large scale econometric model of the United Kingdom economy’, paper presented at the Third International Conference on Mathematical Modelling, University of Southern California, Los Angeles, July 1981.

(note 6 in page 20) See for example ‘Assessing economic models and econ omic forecasts’ National Institute Economic Review, no. 95, pp. 21-31, February 1981.

(note 1 in page 21) See table 21 in National Institute Economic Review, no. 96, p. 30, May 1981.