The Armchair Forecaster Andrew J Buck Temple University

The Armchair Forecaster Andrew J. Buck Temple University 215 -204 -1985 215 -204 -8173 (FAX) buck@astro. ocis. temple. edu

Important Web Links My Home Page http: //oll. temple. edu/economics Interactive Economics Database http: //bos. business. uab. edu/browse/bci_97. htm Economic Indicators: The Conference Board http: //www. tcb-indicators. org Build Your Own Forecasting Model http: //fairmodel. econ. yale. edu Commentary, Regional and National Forecasts http: //www. dismal. com General Economic Interest http: //www. yardeni. com/welcome. html European Economic Statistics http: //europa. eu. int/en/comm/eurostat The Economies of Asia and Latin America http: //www. stern. nyu. edu/~nroubini/asia/Asian. Homepage. html

Forecasting and some basic economic paradigms Forecasting is the art of trying to see into the future on the basis of what we know about the present. In order to avoid the appearance of gazing into a crystal ball, we try to use paradigms of economic behavior to organize our thinking. Supply and Demand P , Q Supply P , Q Fiscal Policy Taxes AD GDP Gov't Spending AD GDP Monetary Policy Res. Req. MS i I AD GDP Disc. Rate MS i I AD GDP Buy Bonds MS i I AD GDP A Small Simulation

Some Features of the Domestic and World Economic Landscape The U. S. Asia Brazil Europe

United States – 1998 Growth: Low of 2%, High of 5% – 1999 Outlook • • Weakness in Asia, Russia and Latin America Stagnant Europe Profit Squeeze Consumer is a weakening engine of growth

Brazil • • Too much short term foreign debt What did they spend all those reales on? Central Gov’t vs. States Fiscal discipline

Asia • Overvalued Currencies • Too Much Foreign Debt • Risky Lending in Existing Assets

Europe • Sacrificed Fiscal Autonomy on the Alter of a Unified Currency • Expensive, Inflexible Labor • Bright Spots: Ireland Portugal

Components of ILEI • • • Interest Rate Spread Money Supply Average Work Week New Orders, Consumer Goods S&P 500 Joblessness Vendor Performance Housing Permits Consumer Expectations New Orders, Non-defense Capital Goods

LEI - The Long View • 6 - 9 months out • Booms and recessions • Recent Boom

Recent History of LEI • 3 Consecutive Declines = Recession • Oct: 105. 7 • Nov: 106. 3 • Next Release: 2/2/99