The Making of National Economic Forecasts
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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.
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Chapter 7: A High-frequency Forecasting Model and its Application to the Japanese Economy

Yoshihisa Inada


Yoshihisa Inada INTRODUCTION The purpose of this chapter is to evaluate the weekly forecast performance of the Japanese economy by a high-frequency forecasting model that the author developed at the Department of Economics at Ritsumeikan University. In the following pages we first explain the development of the postwar Japanese economy for better understanding of the current Japanese economy. Then we explain the features of our high-frequency model and the forecast method in Section 2. We introduce the application to the Japanese economy of high-frequency model building based on the history of the method of estimating the preliminary figures of quarterly GDP in Section 3, followed by the presentation of a forecasting model. The forecast accuracy of the Japanese high-frequency model is evaluated in Section 4. Recent examples of forecasts based on the high-frequency model are shown in Section 5. Finally, the development of the highfrequency model forecast in the future is discussed. 1. DEVELOPMENT OF THE POSTWAR JAPANESE ECONOMY The Japanese economy in the postwar era can be divided roughly into five periods. First, the era from the end of the war to a full-fledged high growth period is explained in ‘Postwar recovery, 1945–55’. It was in 1955 that the industrial output exceeded the peak of prewar days. The second is the ‘High-growth period, 1956–73’ that continued, and ended with the first world oil crisis. The third period is an ‘Adjustment period after the collapse of high growth, 1974–91’, followed by a shift from high growth to...

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