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Thursday, January 26, 2006

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Angry Economist

My very own golden rules of forecasting:

1. Forecasts should be used as part of a process of trying to understand the future – they provide only a partial insight into the economy
2. Any judgements about the future are not facts waiting to happen – there is a chance that they won’t come true
3. Any judgements about the future are based on current information – and this information can be out of date, inaccurate or wrong
4. The forecasts you use should be based on the most accurate (thanks dearieme) and up-to-date information available
5. It is strongly recommended that forecasts do not lead policy response
6. For any forecast it is correct to focus on broad movements and changes rather than on precise numbers
The user should recognise that all projections are subject to error
7. Forecasts cannot predict shocks or sudden events
8. Forecasts should be read with a critical eye – they are usually based on modelling techniques and can overlook the specific uniqueness of local characteristics
9. Finally, forecasts should never be used as the sole input into planning or decision-making

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