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Should business rely on business cycle forecasting?

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  • Tobias F. Rötheli

    (University of Erfurt)

Abstract

We investigate the circumstances in which business cycle forecasting is beneficial for business by addressing both the short-run and the long-run aspects. For an assessment of short-run forecasting we make a distinction between using publicly available information of cycle probabilities and the use of resources to sharpen this outlook. A sharpened forecast can pay off because it helps the firm to optimally select its output mix. For a long-run perspective we show that firms whose optimal level of operation varies with varying selling prices gain from an accurate assessment of the likelihood of the states of expansion and recession. Petroleum refining in the U.S. is econometrically studied as an exemplary industry. The results document cyclical regularities that indicate that forecasting is advantageous for firms in this industry.

Suggested Citation

  • Tobias F. Rötheli, 2018. "Should business rely on business cycle forecasting?," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 26(1), pages 121-133, March.
    • Handle: RePEc:spr:cejnor:v:26:y:2018:i:1:d:10.1007_s10100-017-0477-8
    DOI: 10.1007/s10100-017-0477-8
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    More about this item

    Keywords

    Forecasting; Business cycle; Planning; Strategic management;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm

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