PLEASE RESPOND TO EACH OF THE 2 STUDENTS’ DISCUSSION POSTS SEPARATELY WITH 2 REFERENCES PER STUDENT. I WILL PROVIDE INSTRUCTIONS AND EACH STUDENT’S POST.
Richard Rios
Chapter 5 in our class text highlights two types of forecasting: qualitative forecasting and quantitative forecasting. Qualitative forecasting compliments the idea that forecasting is an art and quantitative represents the scientific side of forecasting. Furthermore, panel consensus is a form of qualitative forecasting while the econometric method is a form of quantitative forecasting. What distinguishes the two methods of forecasting is the way in which the forecasts are derived. Panel consensus as its name suggests are forecasts generated based on judgements of a person or groups of people. An example of this would be conducting an economic survey and using the results of the survey to base forecasts. Another example of a qualitative forecasting method is by analyzing economic indicators. There are 3 types of indicators: leading, concentric, and lagging indicators. Each of these indicators forecasts a specific economic direction that the market is believed to be moving towards. In terms of quantitative forecasting, econometric forecasting uses a more scientific approach in generating forecasts. In this model, forecasts are generated based on a thorough analysis of historical data of explanatory variables. This method is much more analytical in its use of research and math computations to build forecasts.
References
Young, P. K., Erfle, S., & Keat, P. G. (2014). Managerial Economics (7th ed.). Pearson Education (US). Retrieved from https://online.vitalsource.com/books/9780133560329
Leigh Ann Friedrich
“Forecasting is both an art and a science.” Discuss with particular reference to Panel Consensus and Econometric Method.
Forecasting is indeed both an art and a science. Some methods are qualitative, “based on judgements of individuals or groups,” while others are quantitative, “generally uses significant amounts of prior data as a basis for prediction,” (Keat et al., 2013, p. 134).
Panel consensus is a type of forecasting that uses different types of approaches to gather information from experts in a particular field or area. There are two types of panel consensus that are discussed in our text, jury of executive opinion and the Delphi Method. A jury of executive opinion is a type of forecast that comes from a group of experts that meet to discuss a particular aspect within the business. These experts are typically executives from different areas of the company. (Keat et al., 2013, p. 135)
The Delphi Method also uses a panel with expertise in the area. This panel does not formally meet. Instead, the members of the panel are posed questions. Their responses are compiled to come up with the best forecasting solution. (Keat et al., 2013, p. 135).
Econometric models are quantitative. Regression analysis is used in this model to look at patterns from the past to make future predictions. (Keat et al., 2013, p. 153) Economists use econometric models to “forecast future developments in the economy,” (Hymans, 2022). Some past events that may be evaluated are “past relationships among such variables as consumer spending, household income, tax rates, interest rates, employment, and the like, and then try to forecast how changes in some variables will affect the future course of others,” (Hymans, 2022).
Hymans, S. H. (2018, October 11). Forecasting and econometric models. Econlib. Retrieved September 20, 2022, from https://www.econlib.org/library/Enc/ForecastingandEconometricModels.html
Keat, P. G., Young, P. K. Y., & Erfle, S. E. (2013). Managerial Economics: Economic Tools for today’s decision makers. Pearson.