today's (12/21/00) Wall St. Journal says that economists and corporate
chiefs alike have been surprised by the "sudden" world wide slowdown in
the economy.
They should have listened to Rob Schaap!!!!
Gene Coyle
******************
"Specifically, we ask whether, given commercial forecasts of inflation, the
Federal Reserve forecasts are useful in predicting inflation. To analyze
this question, we examine regressions of inflation on commercial and Federal
Reserve forecasts. We find that the Federal Reserve possesses statistically
significant and quantitatively important additional information. In a
typical regression, the coefficient oin the commercial forecast is small and
insignificant while that on the Federal Reserve forecast is substantial and
highly significant. This suggests that the optimal forecasting strategy of
someone with access to both forecasts would be to put essentially no weight
on the commercial forecast. These findings are robust across forecasting
horizons, commercial forecasters, and sample periods. We also find that the
Federal Reserve possesses equally important additional information about the
path of future output."
["Federal Reserve Information and the Behavior of Interest Rates" Christina
& David Romer, American Economic Review, June 2000]
"...perhaps there is something to the suggestion that we need to rethink our
assumptions about what the goals of economic theorizing are. If we take
seriously the notion that science requires persistent predictive
improvement, our understanding of of the aims and methods of economics
becomes cloudier and cloudier...."
[Alexander Rosenberg "Economics--Mathematical Politics or Science of
Diminishing Returns",p.20]
Ian
