Emphasizes the critical role of judgment in improving projections derived from purely statistical methodologies. Harris explores the prerequ
Table of Contents
Acknowledgments xiii
Introduction: What You Need to Know about Forecasting xv
Chapter 1 What Makes a Successful Forecaster? 1
Grading Forecasters: How Many Pass? 2
Why It’s So Difficult to Be Prescient 8
Bad Forecasters: One-Hit Wonders, Perennial Outliers, and Copycats 16
Success Factors: Why Some Forecasters Excel 22
Does Experience Make Much of a Difference in Forecasting? 23
Chapter 2 The Art and Science of Making and Using Forecasts 27
Judgment Counts More Than Math 28
Habits of Successful Forecasters: How to Cultivate Them 34
Judging and Scoring Forecasts by Statistics 43
Chapter 3 What Can We Learn from History? 51
It’s Never Normal 52
Some Key Characteristics of Business Cycles 55
National versus State Business Cycles: Does a Rising Tide Lift All Boats? 62
U.S. Monetary Policy and the Great Depression 65
The Great Inflation is Hard to Forget 68
The Great Moderation: Why It’s Still Relevant 73
Why Was There Reduced Growth Volatility during the Great Moderation? 75
Chapter 4 When Forecasters Get It Wrong 79
The Granddaddy of Forecasting Debacles: The Great Depression 80
The Great Recession: Grandchild of the Granddaddy 81
The Great Recession: Lessons Learned 85
The Productivity Miracle and the “New Economy” 86
Productivity: Lessons Learned 88
Y2K: The Disaster That Wasn’t 90
The Tech Crash Was Not Okay 92
Forecasters at Cyclical Turning Points: How to Evaluate Them 96
Forecasting Recessions 99
Forecasting Recessions: Lessons Learned 101
Chapter 5 Can We Believe What Washington, D.C. Tells Us? 105
Does the U.S. Government “Cook the Books” on Economic Data Reports? 106
To What Extent Are Government Forecasts Politically Motivated? 109
Can You Trust the Government’s Analyses of Its Policies’ Benefits? 114
The Beltway’s Multiplier Mania 120
Multiplier Effects: How Real Are They? 124
Why Government Statistics Keep “Changing Their Mind” 127
Living with Revisions 133
Chapter 6 Four Gurus of Economics: Whom to Follow? 137
Four Competing Schools of Economic Thought 139
Minskyites: Should We Keep Listening to Them? 140
Monetarists: Do They Deserve More Respect? 149
Supply-Siders: Still a Role to Play? 156
Keynesians: Are They Just Too Old-Fashioned? 161
Chapter 7 The “New Normal”: Time to Curb Your Enthusiasm? 171
Must Forecasters Restrain Multiyear U.S. Growth Assumptions? 173
Supply-Side Forecasting: Labor, Capital, and Productivity 175
Are Demographics Destiny? 179
Pivotal Productivity Projections 184
Chapter 8 Animal Spirits: The Intangibles Behind Business Spending 199
Animal Spirits on Main Street and Wall Street 201
Can We Base Forecasts on Confidence Indexes? 207
Business Confidence and Inventory Building 208
How Do Animal Spirits Relate to Job Creation? 213
Confidence and Capital Spending: Do They Move in Tandem? 217
Animal Spirits and Capital Spending 226
Chapter 9 Forecasting Fickle Consumers 229
Making and Spending Money 230
How Do Americans Make Their Money? 231
Will We Ever Start to Save More Money? 237
Why Don’t Americans Save More? 239
More Wealth = Less Saving 240
Do More Confident Consumers Save Less and Spend More? 248
Does Income Distribution Make a Difference for Saving and Consumer Spending? 250
Pent-Up Demand and Household Formation 252
Chapter 10 What Will It Cost to Live in the Future? 259
Whose Prices Are You Forecasting? 260
Humans Cannot Live on Just Core Goods and Services 261
Sound Judgment Trumps Complexity in Forecasting Inflation 266
Should We Forecast Inflation by Money Supply or Phillips Curve? 271
Hitting Professor Phillips’ Curve 271
A Statistical Lesson from Reviewing Phillips Curve Research 280
Chapter 11 Interest Rates: Forecasters’ Toughest Challenge 285
Figuring the Fed 288
Federal Open Market Committee 288
What is the Fed’s “Reaction Function”? 290
Is the Fed “Behind the Curve”? 293
Can the Fed “Talk Down” Interest Rates? 294
Bond Yields: How Reliable Are “Rules of Thumb”? 294
Professor Bernanke’s Expectations-Oriented Explanation of Long-Term Interest Rate Determinants 297
Supply and Demand Models of Interest Rate Determination 299
When Will OPEC, Japan, and China Stop Buying Our Bonds? 302
What Will Be the Legacy of QE for Interest Rates? 304
What is the Effect of Fed MBS Purchases on Mortgage Rates? 309
Will Projected Future Budget Deficits Raise Interest Rates? 309
Chapter 12 Forecasting in Troubled Times 315
Natural Disasters: The Economic Cons and Pros 316
How to Respond to a Terrorist Attack 321
Why Oil Price Shocks Don’t Shock So Much 325
Market Crashes: Why Investors Don’t Jump from Buildings Anymore 332
Contagion Effects: When China Catches Cold, Will the United States Sneeze? 334
Chapter 13 How to Survive and Thrive in Forecasting 341
Surviving: What to Do When Wrong 345
Hold or Fold? 348
Thriving: Ten Keys to a Successful Career 349
About the Author 355
Index 357
