The term ‘economic forecasting’ refers to the process which makes predictions about the economy. These forecasts can be run on a high level of aggregation (e.g. inflation, unemployment or GDP) or at a more segmented level, focusing on specific sectors or firms.
There are different institutions which are focusing on the economic forecasting including international organisations such as the OECD, the International Monetary Fund and the World Bank. As well as this, other entities such as central banks and national governments concentrate on the subject.
During the economic forecasting process, economists can use statistical analysis of historical data to determine the relationships between variables.
There are different aims related to the discipline. Indeed, governments or companies can use this economic forecasting to develop their strategy and multi-year plans or decide their budget for the following year. Also, stock market analysts use economic forecasting to evaluate the company value and its stock.
The process of economic forecasting is similar to data analysis. Usually, the method is divided into six steps: scope, literature review, obtain data input, determine historical relationships, model, report.
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