Afternoon Must-Read: Simon Wren-Lewis: On Macroeconomic Forecasting
Simon Wren-Lewis: On Macroeconomic Forecasting: “Macroeconomic forecasts produced with macroeconomic models…
…tend to be little better than intelligent guesswork. That is not an opinion–it is a fact…. The sad news is that this situation has not changed since I was involved in forecasting around 30 years ago. During the years before the Great Recession (the Great Moderation) forecasts might have appeared to get better, but that was because most economies became less volatile. As is well known, the Great Recession was completely missed…. Does that mean that macroeconomics is not making any progress?… [This] raises an obvious question: why do people still use often elaborate models to forecast?… Why use the combination of a macroeconomic model and judgement to do so, rather than intelligent guesswork?…