In addition to their professional academic interest, the use of models include:
- Forecasting economic activity in a way in which conclusions are logically related to assumptions;
Forecasting economic activity with targeted predictors
Forecasting the US economy
Forecasting the World economy
Forecasting the World economy
Short-term forecasts
Long-term forecasts
Kiplinger's Economic Outlooks
| GDP | 2.3% growth for '16, down slightly from '15 More » |
|---|---|
| Unemployment | Falling to 4.6% by end '16, from 5% now More » |
| Interest rates | 10-year T-notes at 2.4% by end '16 More » |
| Inflation | 2.4% for '16, up from 0.7% in '15 More » |
| Business spending | 4% gain in '16, after drop in '15 More » |
| Energy | Crude oil trading from $35 to $40/bbl. into May More » |
| Housing | Construction of single-family homes up 15% this year More » |
| Retail sales | 3.9% growth in '16, from 4.6% in '15 (excluding gasoline sales) More » |
| Trade deficit | Widening 4% in '16, after a 6.2% increase in '15 More » |
Gross Domestic Product
Gross domestic product is the broadest indicator of the economy, measuring the value of final goods and services produced in the U.S. in a given time period. It is perhaps the most closely watched indicator as well, serving as a guidepost for Federal Reserve interest rate policy and fir budgeting both government and private industry.
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- Planning and allocation, in the case of centrally planned economies, and on a smaller scale in logistics and management of businesses.
- In finance predictive models have been used since the 1980s for trading (investment, and speculation),
- Since the 1990s many long-term risk management models have incorporated economic relationships between simulated variables in an attempt to detect high-exposure future scenarios (often through a Monte Carlo method).
A model establishes an argumentative framework for applying logic and mathematics that can be independently discussed and tested and that can be applied in various instances. Policies and arguments that rely on economic models have a clear basis for soundness, namely the validity of the supporting model.
Economic models in current use do not pretend to be theories of everything economic; any such pretensions would immediately be thwarted by computational and feasibility and the incompleteness or lack of theories for various types of economic behavior. Therefore conclusions drawn from models will be approximate representations of economic facts. However, properly constructed models can remove extraneous information and isolate useful approximations of key relationships. In this way more can be understood about the relationships in question than by trying to understand the entire economic process.
The details of model construction vary with type of model and its application, but a generic process can be identified. Generally any modelling process has two steps: generating a model, then checking the model for accuracy (sometimes called diagnostics). The diagnostic step is important because a model is only useful to the extent that it accurately mirrors the relationships that it purports to describe. Creating and diagnosing a model is frequently an iterative process in which the model is modified (and hopefully improved) with each iteration of diagnosis and re specification. Once a satisfactory model is found, it should be double checked by applying it to a different data set.
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