Policy Analysis, Forediction, and Forecast Failure

Economic policy agencies accompany forecasts with narratives, a combination we call foredictions, often basing policy changes on developments envisaged. Forecast failure need not impugn a forecasting model, although it may, but almost inevitably entails forediction failure and invalidity of the associated policy. Most policy regime changes involve location shifts, which can induce forediction failure unless the policy variable is super exogenous in the policy model. We propose a step-indicator saturation test to check in advance for invariance to policy changes. Systematic forecast failure, or a lack of invariance, previously justified by narratives reveals such stories to be economic fiction.