Both the judgmental forecast
and the DSGE model have an advantage over the purely statistical model, the BVAR, in that the people who produce the Greenbook and Blue Chip forecasts obviously know a lot more than seven time series, and the DSGE model was built to match the data that are being forecast.
Also, Makridakis (1987) indicated that managers should prepare a separate judgmental forecast
, and then objectively combine it with quantitative forecasts, rather than use judgment for the blending process itself.
If the linkages among policy, the economy, and prices were well enough understood, reasonably stable over time, and mostly free from noise, they might be captured by a reliable empirical model or perhaps by judgmental forecasts
. Then the job of implementing policy might still be straightforward: Policy adjustments, though perhaps not adhering to transparent rules of thumb, could be calibrated from the model or judgmental forecast
, taking into account the inflation objectives and output constraints of the authorities.
Even in a less structured approach, getting more views for a judgmental forecast
can be helpful--but beware of group forecasting.
Combining statistical and judgmental forecasts
via a web-based tourism demand forecasting system.
A manager with years of experience may tend to lean on judgmental forecasts
because of past experience.
Researching forecasting practices 12 years ago Wisner and Stanley (1994), reported on a 1992 survey of supply chain managers that found judgmental forecasts
were favored, and that managers were not taking full advantage of the improved forecasting techniques available.
They found that these judgmental forecasts
were not, in most cases, more accurate than the naive forecast, and the forecasts suffered from both inefficiency and bias.
Monthly data (money supply (MI), the unemployment rate, and the Treasury bill rate) are defined to include quantities reported in two different quarters in order to avoid giving an unfair advantage to the large model with judgmental forecasts
to which Litterman's model is being compared.
However, there are differences in the emphasis given to model-based forecasts relative to judgmental forecasts
and those based on expert opinion.
are often used when historical data are not available, such as a new and unique capital project.
should be another tool as well.