Errors in National Institute Forecasts of the Balance of Payments

A recent issue of the National Institute Economic Review contained an article in which errors in the National Institute's forecasts of the national income accounts were analysed. One of those who reviewed the article criticised it on the grounds that the author ‘does not make an assessment of the balance of payments forecasts, which really is like putting on Lear without the King’. On the strength of his own ‘fairly crude’ comparison between these forecasts of the balance of payments and the official estimates of what actually happened, he went on to suggest that the errors in the former in the ‘crucial’ years of 1960, 1967, and 1968 were ‘large enough to … make one doubt whether balance of payments forecasting, whether short- or medium-term, is really a possible or worthwhile exercise’. The present article, already planned when the earlier one appeared, is an attempt to fill the gap on the stage. It aims to provide a rather more refined basis for judging the worth of such forecasts, and perhaps at the same time to improve the prospect that some of the grosser errors of the past may be avoided in the future.