Economic Forecasting

Until the 1970s, it was widely accepted that the American economy passed through business cycles. Such cycles were characterized by expansion and contraction phases, and conventional wisdom held that such cycles differed in the length of the cycle, but not in the existence of the cycle overall. From 1854 to the mid-1960s, analysts generally considered that business cycles varied in length from between one and eight years, with the most common length being three years and the average length being four (Dauten & Valentine, 1968, p. 279).

Business cycles, according to traditional thinking, affected all countr

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mental units have their own forecasting staffs which develop specialized projections relevant to their activities and resource needs. There are three commonly used short-term economic froecasting techniques: judgmental approach, econometric modeling, and the indicator approach. The judgemental approach holds that individuals are the most sensitive and comprehensive evaluator of the diverse evidence as to what is likely to occur in the future. The limitation of this method is that not all conclusions that are reached can be based on pure logic, but instead involve (as its name implies) the judgment of the individual making the analysis. The most significant drawback to the judgemental approach is that there is no real way to determine what has gone wrong if the method fails, and thus it is difficult to come up with remedial steps that can be taken to make the method work better in the future. Econometric modeling emerged during 1950s from earlier attempts to describe the entire economy as a set of mathematical equations. In this approach, plausible relationships among various economic components, such as prices, wages and investment levels, relate time-specific levels with one another in order to reproduce past patterns of e
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Approximate Word count = 2332
Approximate Pages = 9 (250 words per page)

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