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NIESR will hold the public launch of our next Economic Review at 11am on 31 January 2008 at our offices at 2 Dean Trench Street, Smith Square, London SW1P 3HE. The UK and World Economy forecast will be discussed in detail in the event.
This time, the Economic Review focuses on the issue of Recent developments in economic forecasting. Forecasts of the future values of economic variables continue to be regularly produced by professional forecasters, both produced and used by policy-makers and used, but also abused (i.e. castigated), by the media.
The National Institutes regular forecasts are prepared using its global econometric model which has, of course, developed over the years. In parallel with this development a considerable body of work has built up looking both at the uncertainty surrounding forecasts and at forecasting by means of statistical rather than structural models. This issue of the Review brings together five papers, from leading academics in the area, reflecting these main developments.
The following articles will be published in full in the latest issue of the Review:
Commentary: The Balance of Payments and the Savings Gap by Martin Weale
The World Economy by Ray Barrell, Dawn Holland, Iana Liadze,Catherine Guillemineau, Tatiana Fic, Sylvia Gottschalk, Olga Pomerantz and Ehsan Khoman
The risks of a pronounced setback to the world economy have risen as a result of the continuing financial crisis.
The central forecast is one in which global growth moderates from 4.7 per cent in 2007 to 4.4 per cent in 2008.
That envisages a resilient Asian economy and a manageable slowdown in the OECD economies, where growth will decelerate from 2.7 per cent in 2007 to 2.3 per cent this year.
According to the main forecast for 2008, China grows by 10.3 per cent, the United States by 2.2 per cent, the Euro Area by 1.9 per cent and Japan by 1.7 per cent.
But a severe banking crisis would drive the US economy into recession, causing its output to stagnate this year compared with last, and push growth in the Euro Area below 1 per cent.
The UK Economy by Ray Barrell, Ehsan Khoman and Simon Kirby
GDP growth will slow from 3.1 per cent in 2007 to 2.0 per cent in 2008 as the financial crisis bites.
The main sources of the slowdown will be household spending and business investment as they react to tighter credit conditions.
GDP growth will pick up to 2.4 per cent in 2009, as the economy rebalances away from the consumer towards exports.
Consumer price inflation will rise to 2.6 per cent in the third quarter of 2008 because of the sharp fall in the exchange rate and rising energy bills.
The public finances have deteriorated and annual tax increases of £9 billion would be needed for the Government to meet its golden rule of borrowing only to invest.
Research Articles:
Introduction: Recent developments in economic forecasting by James Mitchell
Real-time probability forecasts of UK macro events by Anthony Garratt, Kevin Lee and Shaun Vahey (e-mail: a.garratt@bbk.ac.uk)
The GDP fan charts: an empirical evaluation by Kevin Dowd
(e-mail: Kevin.Dowd@Nottingham.ac.uk)
Here is the news: forecast revisions in the Bank of England survey of external forecasters by Gianna Boero, Jeremy Smith and Kenneth F. Wallis
(e-mail: K.F.Wallis@warwick.ac.uk)
A point about this prominent paper is that it will be the first piece of work on the Bank\\\'s forecast survey to appear in print. Although it is the third piece of work the team of these leading academics have completed on this dataset, the other two have got snarled up in academic journals with much longer processing time than the Review, so this one has overtaken them and will in effect launch their work on the survey, and the accessibility of the Bank\\\'s dataset.
A review of forecasting techniques for large data sets by Jana Eklund and George Kapetanios (e-mail: g.kapetanios@qmul.ac.uk)
Forecasting the Swiss economy using VECX* models: an exercise in forecast combination across models and observation windows by Katrin Assenmacher-Wesche and M.Hashem Pesaran (e-mail: Katrin.Assenmacher-Wesche@snb.ch).
Please reserve a press seat for the launch by contacting Johanna Juselius at the NIESR Press Office, on 020 7654 1931 or e-mail j.juselius@niesr.ac.uk.
Please note that the Commentary, UK and World Economy articles are under embargo until 1 February 2008 at 00:01 hours and the research articles are under embargo until 31 January 2008 at 00:01 hours.
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