Business Economics - Forecasting

Forward economic planning or economic forecasting is vital to businesses to enable them to predict future patterns of consumption and therefore capacity requirements. A technique that businesses can use to do this is macroeconomic modelling, in which the various sectors of the economy are modelled through a series of mathematical relationships. An example of such an econometric model available on the Web is the Fairmodel site, which is based on the work of by Ray C. Fair at Yale University in the US.

Fairmodel

This site provides the power of a large scale macroeconometric analysis to anyone with access to the Web. It is a resource for business forecasters, government policy analysts, teachers and students. The site is completely free and features: a US and multi-country forecasting model; policy analysis and examination of historical episodes; tables and graphs online and/or to download, together with some historical and forecast data; online and downloadable data sections; and a downloadable FAIR-PARKE (FP) program. This is a DOS-based, command-line program which allows students to estimate and analyse dynamic, non-linear, simultaneous equation models. The site also includes a very useful workbook, which introduces students to the US model and data sources.

Students are advised that this site contains advanced technical material which goes beyond the knowledge assumed in elementary business economics. However, those with a strong quantitative background may find this site both challenging and stimulating.

Virtual Economy

For a slightly more user friendly illustration of macroeconomic modelling and forecasting, students may be interested in having a look at the Biz/ed Virtual Economy. This is an adapted version of the HM Treasury model of the economy with the Institute for Fiscal Studies tax-benefit model showing the impact of economic policies on individuals in the economy. The Virtual Economy allows experimentation with all the key macro policy tools (tax, interest rates, government expenditure and benefits). The Virtual Economy also has a wide range of supporting materials to help users understand the macroeconomic management of the economy and associated theories. The Virtual Economy was developed by the Institute for Fiscal Studies, Biz/ed and the Macroeconomic Modelling Centre at Warwick University.

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