Why the BoE got Brexit forecasts wrong

cogito

They believed the doom mongering in the newspapers that supported Remain.

http://www.telegraph.co.uk/news/2016/11/28/doom-mongering-brexit-forecasts-have-serious-holes-reality/

What a bunch of clowns. To think that management of the economy is entrusted to them.

Thrugelmir

Jury's still out at the moment. There's an unpleasant surge of inflation blowing in.

CLAPTON

The crux of the argument being made by Ms Forbes, Member of the BOE Monetary Policy Committee is about the unscientific use of 'uncertainty ' in downgrading UK growth forecasts.
Apparently, one measure is the number of times the words 'economic uncertainty' is uses in the F Times, Times, Guardian and Independent.
There appears to be no systemic historic correlation between this measue of 'media references to uncertainty' and actual outturn economic growth.

Most of us would find in incredible that the BOE counts such things or takes any account of the results.

TrickyTree83

CLAPTON wrote: »

The crux of the argument being made by Ms Forbes, Member of the BOE Monetary Policy Committee is about the unscientific use of 'uncertainty ' in downgrading UK growth forecasts.
Apparently, one measure is the number of times the words 'economic uncertainty' is uses in the F Times, Times, Guardian and Independent.
There appears to be no systemic historic correlation between this measue of 'media references to uncertainty' and actual outturn economic growth.

Most of us would find in incredible that the BOE counts such things or takes any account of the results.

Have I understood you correctly?

Are you saying the BoE take media reports on economic performance into account, ignoring journalistic licence to exaggerate and sometimes misinform?

(I don't have a telegraph subscription, so I've not read the article)

CLAPTON

TrickyTree83 wrote: »

Have I understood you correctly?

Are you saying the BoE take media reports on economic performance into account, ignoring journalistic licence to exaggerate and sometimes misinform?

(I don't have a telegraph subscription, so I've not read the article)

the short answer is yes although it is not the only measure.

if you are interested you can read Kristen Forbes paper here

http://www.bankofengland.co.uk/publications/Documents/speeches/2016/speech942.pdf

The telegraph article is more focused on political brexit issues and written by a politician Dominic Raab (conservative, presumbaly pro brexit)

glentoran99

Considering we haven't left how can forecasts be proven right or wrong?

TrickyTree83

CLAPTON wrote: »

the short answer is yes although it is not the only measure.

if you are interested you can read Kristen Forbes paper here

http://www.bankofengland.co.uk/publications/Documents/speeches/2016/speech942.pdf

The telegraph article is more focused on political brexit issues and written by a politician Dominic Raab (conservative, presumbaly pro brexit)

Yes he is pro brexit.

Appreciate it's not the only measure, I suppose there's some truth behind it in that when the media whip up hysteria by telling everyone everything is going to hell in the economy people lose confidence and spend less on luxury items, and sometimes less on the essentials. I find it sad that the media holds so much power over such things whilst at the same time being so biased (on both sides) and so untrustworthy as a result.

Don't like Brexit - continually tell everyone how bad it is/is going to be. Like Brexit - continually tell everyone how great it is/is going to be. It's a shame politics infests everything instead of honesty, evidence and pragmatism.

TrickyTree83

glentoran99 wrote: »

Considering we haven't left how can forecasts be proven right or wrong?

The international institutions that warned of a contraction in the economy after a vote to leave, just the mere action of voting to leave, have had to revise their estimates as it turned out they were incorrect. We've had a full quarter to analyse the impact now, and they've acknowledged they were wrong. Or at least that is how I understand it.

Masomnia

TrickyTree83 wrote: »

The international institutions that warned of a contraction in the economy after a vote to leave, just the mere action of voting to leave, have had to revise their estimates as it turned out they were incorrect. We've had a full quarter to analyse the impact now, and they've acknowledged they were wrong. Or at least that is how I understand it.

There were plenty, including posters on here, who were saying just the fact that we were having the referendum in the first place would cause investment to be put off, job losses etc. prior to it happening.

But yes the exact phrase from the remain camp was that a vote to leave would cause 'an instant DIY recession'. Clearly that's not happening, and no one is now predicting recession in the near future. From what I remember the poll on here showed most people predicting recession as a result of the vote to leave.

In defence of the forecasters though, I do think it's impossible to predict what will happen when you're in completely uncharted territory and it's all just giving a best guess; but it's their job to give it a go. Having said that some of them were clearly political, ie the Treasury forecast. They've certainly gone down in my estimation as a result.

Overall I don't think things will be plain sailing, but clearly not as bad as what we were threatened with.

Sapphire

I'm far more worried about us staying in the EU for much longer, given the economic state it is in.

Additionally, it needs to fundamentally change and stop issuing threats, which are certainly not a good way of demonstrating democracy, or that it agrees with countries keeping their national sovereignty – something that will ultimately be insisted on by the citizens of all European countries. One size cannot be made to fit all, either economically or politically. All the EU bureaucrats appear to be doing is proving every more strongly that the EU is not democratic, but moving towards increasing authoritarianism/totalitarianism.

A_Pict_In_A_Past_Life

Here today the OECD revise the UK's forecasts upwards:

Brexit will have less of an impact on the British economy than initially thought, according to the Organisation for Economic Cooperation and Development (OECD) who revised up its UK growth forecasts.

http://www.investmentweek.co.uk/investment-week/news/2478595/oecd-predicts-brexit-impact-will-be-less-than-expected-on-uk-growth