In this article for Mint, Dr. Niranjan Rajadhyaksha, Executive Director, Artha Global, argues that there is a case to rely on alternate approaches, including economic history to complement statistical modelling to better make economic forecasts.
You can read the full article here. Excerpts below:
“The challenge is to communicate such future possibilities to consumers, workers, investors and companies that build their expectations on point forecasts rather than a broad range. Scenarios can help policymakers focus not on a continuous range of possibilities, but on extreme events, such as a pandemic or war, that standard models are not built to anticipate.”
“Economic forecasting has also improved with better data as well as more computing power. It also has a decent track record when there are no large shocks and the forecasting period is relatively short. Yet, the hard fact is that these forecasting models have performed inadequately in recent years, especially in the presence of exogenous shocks.”
