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I think you're right about it being a weird year and hard to predict. The main difficulty was that you didn't only have to predict the economics, you also had to predict the politics. The recession could have been ended very quickly, given rational political decisions, but those decisions didn't seem likely to happen and they didn't happen. They don't look likely to happen this year either.

p.s. your link to last year's post doesn't seem to work.

Last year's post: http://worthwhile.typepad.com/worthwhile_canadian_initi/2011/01/canadian-economic-forecasts-2011-make-yours-now.html

Let's try that with a link.

Link fixed!

And yes, the eurozone and the related, continuing, risk of another financial market meltdown seems to have been the big difference between why the inflation and unemployment numbers are hard to reconcile with the overnight rate target.


Doesn't this post contradict your previous post where you criticized the St. Louis and Atlanta feds for "seeing whether core inflation forecasts future total inflation"?


For example, let's say hypothetically speaking we got a list of every single forecast Mark Zandi (or any other professional forecaster) ever made in his life to the markets/public/media/government, and then compared it to what actually happened.... would that be a correct method to determine whether he is a good forecaster?

And if you can judge Zandi or BearClaw that way, then why can't you do the same with core inflation expectations?

Also, not to be that snotty student in the back corner, but how do we know that BearClaw's accurate forecast was a result of skill or just rather blind luck?

Best! Happy new year!

Joe: yes, it does a bit. But I still think that it's better the Bank of Canada responds to core rather than total, even if the particular method used by those feds to justify that belief doesn't work. It just means I don't have as much evidence for my belief as I would like to have.

There's a difference between how we would evaluate a private sector inflation forecaster and how we would evaluate inflation forecasters that are currently being used by the Bank of Canada. I know that sounds paradoxical. The job of the Bank of Canada is to try to extract all the useful information from an inflation forecaster, so that what remains is useless. Damn! I explained this more clearly once, in one of my old posts. My head isn't working this afternoon. Sorry.

"Also, not to be that snotty student in the back corner, but how do we know that BearClaw's accurate forecast was a result of skill or just rather blind luck?"

We never will. Even if BearClaw gets it right again and again. If you have a million people making forecasts at random, you will still find some of them getting every forecast right time after time.

Ask Stephen! He might give a better answer.

When do we get the 2012 forecasts? :)

I predict US long rates rise substantially as Euroland cools off, with all the resulting unpleasantness one would anticipate.

Looking forward to yours!

I got housed.

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