Assignment:
Forecast paper
Prompt: You will write an economic forecast for one year from now for major global economy. Your forecast should include a history of the economy focusing on interest rates, price levels, unemployment rates, GDP growth rates, level of exports and imports, and other appropriate variables. You should also identify the current state of the economy with attention to the previous variables. Finally, you should offer three possible scenarios for the future state of the economy with attention to significant fiscal and monetary policies that will impact the future. Your paper should be 7-8 pages long, including a one-page bibliography containing your sources. You may also use graphs and charts, but you need to explain relevant information contained within your graphs and charts.
Here is a sample outline you could try to follow if you need more structure:
Introduction - A story, a statistic, a quote, or other attention catcher to set the framework for your forecast.
I. Description of the indicators that you will be using to forecast the economic future. These indicators could be some of the indicators discussed at the website Investopedia: https://www.investopedia.com/articles/economics/08/leading-economic-indicators.asp
II. Description of the present state of the economy focusing on all the measures of the economy that are important such as GDP, M2, inflation rates, unemployment rates, growth rates, exchange rates, trade balances, etc.
III. Your forecast for the future using the select indicators that you have selected to make your forecast.IV. Possible wild card events that could alter the outcome of your forecast.
Conclusion - Summing up the material covered and bringing attention to the likely future direction of the economy.
You could write your forecast paper in many ways, but I suspect a solid forecast will follow the strategy outlined above.
One of the funniest things to me as a professor is that the entire course you are taking is giving you tools to measure the state of the macro economy and predict its future, but it is hard for people to realize this as they work through the various exercises. It sometimes easy to get lost among the trees and not see the forest.
If you need to lengthen the paper out, you can look at variables in more detail. For example, you can break down investment into residential and non-residential investment, etc. You can also look at different scenarios and how they might impact different variables. If you can weight the probability of these scenarios, you can multiply those probabilities times the outcomes and add these sums up to come up with a forecast of what the future is likely to look like for a variable. For example, I could look at the probability of the Federal Reserve raising the target federal funds rate by .25%, .5%, or not raising it at all. If there is a .5 chance to raise interest rate by .25 (.125) and .25 chance they will raise the interest rate by .5 (.125) and a .25 chance they will not raise the interest rate (.0), the average of these products adds to .25. You will learn many tricks as you learn more about how economists model the economy.
Here is another approach you could try for writing your forecast:
I. An introduction describing the difficulty and importance of forecasting the correct state of the economy.
II. A description of important indicators used for forecasting the state of the economy including reference to the Conference Board, the Bureau of Economic Analysis, The Federal Reserve Bank, the Bureau of Labor Statistics, the Commerce Department and the National Bureau of Economic Research.
III. Case Study A (Austrian perspective) - forecasting interest rates, GDP growth and the components of that growth, unemployment and its makeup, the amount of trade and the value of the dollar, inflation, fiscal policy and monetary policy.
IV. Case Study B (Neo-Keynesian perspective) - forecasting interest rates, GDP growth and the components of that growth, unemployment and its makeup, amount of trade and the value of the dollar, inflation, fiscal policy and monetary policy.
V. Case Study C (Marxist perspective) - forecasting interest rates, GDP growth and the components of that growth, unemployment and its makeup, the amount of trade and the value of the dollar, inflation, fiscal policy and monetary policy.
VI. Conclusion and reflections on the most likely direction of the economy.
I hope this structure give you insight into how to do a forecast.