The economic calendar is packed with forecast releases, and each time a new one comes out, social media bursts forth with comments denigrating forecasts.
Common themes are: forecasting and economic modelling are different activities; forecasting is trash-talk, modelling or analysing the present is the serious business; forecasting requires one set of skills, modelling another (viz discussion of whether you need ‘foxes’ or ‘hedgehogs’ for them).
My response to this is to point out that there is not a good separation between modelling and forecasting. A model implies a forecast.
An example of what prompted me to write this is this piece by John Kay, which, while not sinning, is open to a mis-reading by sinners.
Tom Sargent was fond of repeating every lecture that ‘a model is a probability distribution over a sequence’. What he meant was that if you have written down a model, it will contain in…
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