№ 2019/1
MacroeconomicsBANDURA Oleksandr 1
1Institute for Economics and Forecasting, NAS of Ukraine
Information ambiguity and incompleteness in forecasting the recession (the US economy case)
ABSTRACT ▼
This paper considers main factors that provide ambiguity and incompleteness of information when identifying current economic conditions and recession forecasting. Author demonstrates how these information properties influenced the US regulator’s decision making and the quarterly correction of the US economy forecasts made by IMF, World Bank and the US Federal Reserve (Fed) from January to October 2008. Efficiency of some typical models (CLI-index model; Probit-model; Stock-Watson model and Chicago Fed’s National Activity Index (CFNAI-MA3); Yield Curve Inversion model) used by Fed was empirically tested in the course of the forecasting of the US recession. Common drawbacks inherent for these models are summarized. Monitoring of the above mentioned institutions forecasts show, how these drawbacks prevented the regulators from reducing the ambiguity and incompleteness of information when identifying current economic conditions, even when the recession of 2007-09 had already started.
Competitive advantages of author’s CMI-model as compared to typical models noted above are empirically demonstrated. Author demonstrates empirically how CMI-model usage allows us to decrease the information ambiguity and incompleteness when identifying current economic conditions. Besides, it allows us to forecast any recession accurately and timely under all economic conditions and in doing so to increase the efficiency of any cyclical regulation policy. It would be especially useful for Ukrainian economy, where the efficiency of typical models is limited objectively. It is caused by the local (not general) character of these models and by the absence of continuous time series of statistical data, which are necessary to select representative composition of economic indicators that would be able to describe national economy.
Keywords: recession, financial crisis, forecasting efficiency, economic information, forecasting model, leading indicators
JEL: E30, E31, E32, E37
| Article in Russian (pp. 87 - 112) | Download | Downloads :515 |
| Article in Ukrainian (pp. 87 - 112) | Download | Downloads :399 |
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