Sense and Nonsense of Economic Forecasts: Motivation and Methods for Macroeconomic Forecasts
by Ferdinand Fichtner, a researcher at DIW German Institute for Economic Research in Berlin
Selected by Georg-Büchner-Gymnasium Berlin
Economic forecasts do not necessarily have the best reputation in public. Nobody genuinely understands what they are about, and at the same time, they are prone to error in many people’s eyes.
In the course of this challenge, we want to learn the sense – and nonsense – of economic forecasts and develop methods to improve them. Could we use, for example, indications in social media that relate to economic trends? Alternatively, do we need different indicators to provide better forecasts for growth, unemployment rates, and inflation? Moreover, above all, what makes a forecast a useful forecast?
Which institutions publish economic forecasts regularly – both in Germany and worldwide? How do these forecasts differ and why are there these differences?
What are the main elements of economic forecasts? Which economic parameters must be included?
Which methods to forecast an economic development can be differentiated? For which purpose do researchers use these methods respectively?