IDEAS home Printed from https://ideas.repec.org/p/wbk/wbrwps/6705.html

Some thoughts on making long-term forecasts for the world economy

Author

Listed:
  • Fardoust, Shahrokh
  • Dhareshwar, Ashok

Abstract

Countries and international organizations working on longer-range development issues depend on long-term quantitative projections and scenario analysis. Such forecasting has become increasingly challenging, thanks to the rapid pace of globalization, technological progress, the interplay among them, and enhanced connectivity among people. As a result, seemingly isolated events can quickly lead to wide-ranging and lasting regional or even global consequences. This paper examines the problem of long-term economic forecasting in the face of increased complexity and uncertainty. With the benefit of hindsight, it scrutinizes past long-term qualitative and quantitative projections for the 1990s in order to draw lessons on how an institution can and should conduct long-term forecasting and policy analysis. The main conclusions are that policy makers and researchers across the world urgently need to see the big picture if they are to deal with the specific challenges and opportunities they will face over the long term as economies and global linkages undergo major structural changes under conditions of considerable uncertainty and volatility. Global institutions need to have strong research programs that work in close collaboration with other international organizations, academic centers, and independent experts on important long-term development issues ("blue sky"issues) and megatrends. These institutions need to build on their comparative strengths and form teams of in-house researchers and global experts who work on state-of-the-art models related to globalization, technological progress and innovations, climate change, demographic shifts, population, and labor force quality and their policy implications at both the global and country levels. Researchers should be encouraged to consider how global challenges such as financial crises, climate change, and infectious diseases can lead to breaks in economic trends and regime change and how such breaks affect economic activity. Alternative scenarios need to be created that incorporate the views of contrarian forecasters, including forecasts of possible shocks.

Suggested Citation

  • Fardoust, Shahrokh & Dhareshwar, Ashok, 2013. "Some thoughts on making long-term forecasts for the world economy," Policy Research Working Paper Series 6705, The World Bank.
    • Handle: RePEc:wbk:wbrwps:6705
    as

    Download full text from publisher

    File URL: http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2013/11/18/000158349_20131118114900/Rendered/PDF/WPS6705.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Solomou,Solomos, 1990. "Phases of Economic Growth, 1850–1973," Cambridge Books, Cambridge University Press, number 9780521389044, January.
    2. Edison, Hali J. & Marquez, Jaime R. & Tryon, Ralph W., 1987. "The structure and properties of the Federal Reserve Board Multicountry Model," Economic Modelling, Elsevier, vol. 4(2), pages 115-315, April.
    3. World Commission on Environment and Development,, 1987. "Our Common Future," OUP Catalogue, Oxford University Press, number 9780192820808.
    4. Jennifer Castle & David Hendry & Nicholas W.P. Fawcett, 2011. "Forecasting breaks and forecasting during breaks," Economics Series Working Papers 535, University of Oxford, Department of Economics.
    5. World Bank & United Nations, 2010. "Natural Hazards, UnNatural Disasters : The Economics of Effective Prevention," World Bank Publications - Books, The World Bank Group, number 2512, April.
    6. Lin, Justin Yifu & Fardoust, Shahrokh & Rosenblatt, David, 2012. "Reform of the international monetary system : a jagged history and uncertain prospects," Policy Research Working Paper Series 6070, The World Bank.
    7. John Quiggin, 2012. "Zombie Economics: How Dead Ideas Still Walk among Us: With a new chapter by the author," Economics Books, Princeton University Press, edition 1, number 9702, December.
    8. Stefan Bergheim, 2008. "Long-Run Growth Forecasting," Springer Books, Springer, number 978-3-540-77680-2, January.
    9. Sandra Poncet, 2006. "The Long Term Growth Prospects of the World Economy: Horizon 2050," Working Papers 2006-16, CEPII research center.
    10. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "Varieties of Crises and Their Dates," Introductory Chapters, in: This Time Is Different: Eight Centuries of Financial Folly, Princeton University Press.
    11. Collier, Paul, 2008. "The Bottom Billion: Why the Poorest Countries are Failing and What Can Be Done About It," OUP Catalogue, Oxford University Press, number 9780195374636.
    12. Athukorala, Premachandra, 1993. "Manufactured exports from developing countries and their terms of trade: A reexamination of the Sarkar-Singer results," World Development, Elsevier, vol. 21(10), pages 1607-1613, October.
    13. Dani Rodrik, 2008. "Goodbye Washington Consensus, Hello Washington Confusion? A Review of the World Bank’s Economic Growth in the 1990s: Learning from a Decade of Reform," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 55(2), pages 135-156.
    14. Jacob A. Mincer, 1969. "Economic Forecasts and Expectations: Analysis of Forecasting Behavior and Performance," NBER Books, National Bureau of Economic Research, Inc, number minc69-1, January.
    15. Clements, Michael P. & Hendry, David F. (ed.), 2011. "The Oxford Handbook of Economic Forecasting," OUP Catalogue, Oxford University Press, number 9780195398649.
    16. Alfred Kleinknecht, 1987. "Innovation Patterns in Crisis and Prosperity," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-349-18559-7, July.
    17. James H. Stock & Mark W. Watson, 1993. "Business Cycles, Indicators, and Forecasting," NBER Books, National Bureau of Economic Research, Inc, number stoc93-1, January.
    18. Barry P. Bosworth & Susan M. Collins, 2003. "The Empirics of Growth: An Update," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 34(2), pages 113-206.
    19. Poser, Günter & Bloesch, Daniel, 2002. "Economic surveys and data analysis : CIRET (Centre for International Research on Economic Tendency Surveys) conference proceedings," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 20155, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    20. Justin Yifu Lin, 2012. "New Structural Economics : A Framework for Rethinking Development and Policy," World Bank Publications - Books, The World Bank Group, number 2232, April.
    21. Nicolas Carnot & Vincent Koen & Bruno Tissot, 2005. "Economic Forecasting," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-230-00581-5, October.
    22. Timothy Besley & Roberto Zagha, 2005. "Development Challenges in the 1990s : Leading Policymakers Speak from Experience," World Bank Publications - Books, The World Bank Group, number 7369, April.
    23. Stock, James H. & Watson, Mark W. (ed.), 1993. "Business Cycles, Indicators, and Forecasting," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226774886.
    24. Charles R. Hulten & Janet X. Hao, 2012. "The Role Of Intangible Capital in the Transformation and Growth of the Chinese Economy," NBER Working Papers 18405, National Bureau of Economic Research, Inc.
    25. Fardoust, Shahrokh & Dhareshwar, Ashok, 1990. "Long term outlook for the world economy : issues and projections for the 1990s," Policy Research Working Paper Series 372, The World Bank.
    26. Manfred Neumann, 1997. "The Rise and Fall of the Wealth of Nations," Books, Edward Elgar Publishing, number 1215.
    27. Kaplinsky, Raphael, 2006. "Revisiting the revisited terms of trade: Will China make a difference?," World Development, Elsevier, vol. 34(6), pages 981-995, June.
    28. Todd Pugatch & Indermit S. Gill, 2005. "At the Frontlines of Development : Reflections from the World Bank," World Bank Publications - Books, The World Bank Group, number 7357, April.
    29. Ronald McKinnon, 2011. "Worldwide Inflation and International Monetary Reform: Exchange Rates or Interest Rates?," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 19(5), pages 1-16, September.
    30. World Bank, 2010. "World Development Indicators 2010," World Bank Publications - Books, The World Bank Group, number 4373, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Karlsson, Sune, 2013. "Forecasting with Bayesian Vector Autoregression," Handbook of Economic Forecasting, in: G. Elliott & C. Granger & A. Timmermann (ed.), Handbook of Economic Forecasting, edition 1, volume 2, chapter 0, pages 791-897, Elsevier.
    2. Stijn Claessens & M. Ayhan Kose & Marco E. Terrones, 2011. "Financial Cycles: What? How? When?," NBER International Seminar on Macroeconomics, University of Chicago Press, vol. 7(1), pages 303-344.
    3. Clements, Michael P., "undated". "Subjective and Ex Post Forecast Uncertainty: US Inflation and Output Growth," Economic Research Papers 270629, University of Warwick - Department of Economics.
    4. James H. Stock & Mark W. Watson, 2012. "Disentangling the Channels of the 2007-09 Recession," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 44(1 (Spring), pages 81-156.
    5. Claessens, Stijn & Kose, M. Ayhan & Terrones, Marco E., 2012. "How do business and financial cycles interact?," Journal of International Economics, Elsevier, vol. 87(1), pages 178-190.
    6. Clements, Michael P. & Reade, J. James, 2020. "Forecasting and forecast narratives: The Bank of England Inflation Reports," International Journal of Forecasting, Elsevier, vol. 36(4), pages 1488-1500.
    7. Ildeberta Abreu, 2011. "International organisations’ vs. private analysts’ forecasts: an evaluation," Working Papers w201120, Banco de Portugal, Economics and Research Department.
    8. Andrea Carriero & Todd E. Clark & Massimiliano Marcellino, 2016. "Common Drifting Volatility in Large Bayesian VARs," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 34(3), pages 375-390, July.
    9. Willi Semmler, 2011. "Asset Prices, Booms and Recessions," Springer Books, Springer, number 978-3-642-20680-1, January.
    10. James H. Stock & Mark W. Watson, 2012. "Disentangling the Channels of the 2007-2009 Recession," NBER Working Papers 18094, National Bureau of Economic Research, Inc.
    11. DAVID E. ALLEN & MICHAEL McALEER & ROBERT J. POWELL & ABHAY K. SINGH, 2018. "Non-Parametric Multiple Change Point Analysis Of The Global Financial Crisis," Annals of Financial Economics (AFE), World Scientific Publishing Co. Pte. Ltd., vol. 13(02), pages 1-23, June.
    12. Eric Hillebrand & Huiyu Huang & Tae-Hwy Lee & Canlin Li, 2018. "Using the Entire Yield Curve in Forecasting Output and Inflation," Econometrics, MDPI, vol. 6(3), pages 1-27, August.
    13. Hendry, David F. & Clements, Michael P., 2003. "Economic forecasting: some lessons from recent research," Economic Modelling, Elsevier, vol. 20(2), pages 301-329, March.
    14. Ibrahim Ari & Muammer Koc, 2018. "Sustainable Financing for Sustainable Development: Understanding the Interrelations between Public Investment and Sovereign Debt," Sustainability, MDPI, vol. 10(11), pages 1-25, October.
    15. Tsai, Bi-Huei & Chang, Chih-Jen & Chang, Chun-Hsien, 2016. "Elucidating the consumption and CO2 emissions of fossil fuels and low-carbon energy in the United States using Lotka–Volterra models," Energy, Elsevier, vol. 100(C), pages 416-424.
    16. Victor Zarnowitz, 1997. "Business Cycles Observed and Assessed: Why and How They Matter," NBER Working Papers 6230, National Bureau of Economic Research, Inc.
    17. Tobias Hartl & Roland Jucknewitz, 2022. "Approximate state space modelling of unobserved fractional components," Econometric Reviews, Taylor & Francis Journals, vol. 41(1), pages 75-98, January.
    18. Vitor Castro, 2015. "The Portuguese business cycle: chronology and duration dependence," Empirical Economics, Springer, vol. 49(1), pages 325-342, August.
    19. Giovanni Dosi & Andrea Roventini & Emmanuele Russo, 2020. "Public Policies And The Art Of Catching Up," Working Papers hal-03242369, HAL.
    20. Bespalova, Olga, 2018. "Forecast Evaluation in Macroeconomics and International Finance. Ph.D. thesis, George Washington University, Washington, DC, USA," MPRA Paper 117706, University Library of Munich, Germany.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:6705. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Roula I. Yazigi (email available below). General contact details of provider: https://edirc.repec.org/data/dvewbus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.