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Few would deny the need to make forecasts of the macroeconomy. The monetary authorities use forecasts to guide policy decisions taken now, acknowledging that the economy responds only with a lag to policy instruments. The outlook for the economy also affects prospects for firms and consumers and affects their plans and savings and investment behaviour. Many central banks have developed and maintain models designed to forecast future developments, as well as to evaluate the impact of various policy scenarios. In recent times a key challenge has been understanding the impact of ‘unconventional’ monetary policy. Such policies are intended to ensure more expansionary policy than could be achieved by cuts in base rates when rates are at or close to ‘the lower bound’.