The Making of National Economic Forecasts

The Making of National Economic Forecasts

Edited by Lawrence R. Klein

This important book, prepared under the direction of Nobel Laureate Lawrence R. Klein, shows how economic forecasts are made. It explains how modern developments in information technology have made it possible to forecast frequently – at least monthly but also weekly or bi-weekly – depending upon the perceived needs of potential forecast users and also on the availability of updated material.

Chapter 4: High-frequency Forecasting Model for the Russian Economy

Vladimir Eskin and Mikhail Gusev

Subjects: economics and finance, behavioural and experimental economics, econometrics, financial economics and regulation


Vladimir Eskin and Mikhail Gusev RUSSIAN ECONOMIC DEVELOPMENT AND DATABASE ANALYSIS 1. Comprehensive analysis, econometric modeling and forecasting require reliable and comparable data sets for a long enough historical period to establish dynamic properties. Econometric modeling and forecasting in modern Russia still face a lack of adequate and consistent historical statistics, which makes modeling the national economy complicated. Only 13 observations (1993–2006) are available for the development of the macroeconomic models with yearly frequency. Additionally, the instability of time series during the period 1993–98 makes econometric modeling and forecasting even more difficult. The instability of time series during 1993–98 is the result of two economic crises for the Russian economy in the 1990s. The first crisis was the collapse of the Soviet Union in 1991. During 1991–96, Russian GDP decreased more than 40 percent. The main economic changes that took place during that period were liberalization of foreign trade, liberalization of domestic prices and general development of the market economy. The first two resulted in mutual comparability of domestic and world prices, especially for crude oil, gas and primary metals. Increases in the domestic prices of crude oil and other basic commodities increased production costs for domestic manufacturing industries. The poor quality of domestically produced commodities, the increase of production costs and severe competition with imports resulted in a decline of manufacturing production, unemployment growth, and producer and consumer price inflation. Reduced output in all Russian industries, hyperinflation, unemployment growth and income decreases during 1991–96...

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