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- Title
The Use of Information in Balance of Payments Forecasting.
- Authors
Fildes, Robert; Fitzgerald, M. Desmond
- Abstract
In this paper we examine three judgmental forecasters working for City of London institutions who produce Monthly balance of payments forecasts. The market is competitive in that the degree of accuracy of such forecasts is seen as a determinant of exchange dealings and commission income. We attempt to determine the comparative effectiveness of these judgmental forecasters, both between themselves and compared with advanced time series forecasting methods such as the Box-Jenkins ARIMA class of model. As we have mentioned, the issue of whether such judgmental forecasts can improve significantly on time-series methods is both in dispute and of substantial importance to forecasters. <BR> A further topic of investigation is the process of formation of the judgmental forecasts. A number of hypotheses have been developed to explain the formation of judgmental predictions, the most notable being those in the finance and economics literature. The majority of economic models of the formation of expectations have been basically extrapolative in character; typical are the error-learning models and regressive expectations models for the formation of inflationary expectations tested recently in Figlewski and Wachtel (1981). The main alternative approach in economics has been the concept of rational expectations originally suggested by Muth (1961). This develops the idea that expectations ought to be generated by the same process that generates the actual variable in question. Such an approach appears consistent with the more general stimuli-response framework used by social psychologists. Social psychologists have also stressed that certain phenomena may limit the efficiency of judgmental forecasts, undermining "rationality", and we examine the data for evidence on, for example, anchoring or conservatism.
- Subjects
INFORMATION services; BALANCE of payments; EARNINGS per share; ECONOMIC forecasting; BALANCE of trade; COUNTERTRADE; ESTIMATION theory
- Publication
Economica, 1983, Vol 50, Issue 199, p249
- ISSN
0013-0427
- Publication type
Article
- DOI
10.2307/2553967