dels can continue to serve the purpose of explaining/predicting economic events.
There are two types of economic forecasts that are generally developed: short-term (less than two years) and long-term (more than two years) (Zarnowitz & Braun, 1993, p. 39). Short-term forecasting is used extensively to making immediate business and economic policy decisions. Long-term forecasting enters into long-range corporate and governmental planning, and serves as a basis for the prediction of other trends. Although econometric models can be used for both long and short-term forecasting, the traditional approaches to predicting economic behavior varies depending on the time frame. The performance of short-term forecasting is analyzed with attention to the contributions of different methods, while long-term economic forecasting is evaluated with a greater emphasis on the overall levels of accuracy.
Long-term economic forecasting differs from short-term forecasting in that short-term trends depend on the capacity to understand the intricacies and linkages of the current economic structure. In long-term forecasting, these short-term fluctuations need not be accounted for to the same level of detail. What is critical for long-term forecasting is the anticipation of changes in the overall economic structure (Ascher, 1978, p. 85).
Short-term economic forecasting not only generates a great deal of interest among business professionals and government administrators, but also generates a large amount of business for companies specializing in this area. Many large corporations and governmental 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 forecasting techniques: judgmental approach, econometric modeling, and the indicator approach. The judgmental approach holds that individuals are the most sensitive and compr...