Producing Short-Term Forecasts of the Irish Economy: A Suite of Models Approach

The Council’s mandate includes endorsing, or otherwise, the official macroeconomic forecasts of the Department of Finance on which the annual Budget and Stability Programme Update are based. As part of the endorsement... [ view full abstract ]

The Council’s mandate includes endorsing, or otherwise, the official macroeconomic forecasts of the Department of Finance on which the annual Budget and Stability Programme Update are based. As part of the endorsement process and for the purposes of its ongoing monitoring and analysis of the Irish economy, the Council produces its own Benchmark macroeconomic projections. This paper describes the short-run forecasting models used by the Council for producing these projections. The general forecasting approach can be described as follows; equations are used to forecast each component of the expenditure side of the Quarterly National Accounts. Multiple models are estimated for most components; with the model average used as an initial input into the formulation of the Benchmark projections, as this should make the projections more robust. The out-of-sample forecasting performance of these models is assessed at each endorsement round. In addition to these model-based projections, other elements are considered. Discussions with the Council and other forecasting agencies help to guide any judgement that may be applied before arriving at the final Benchmark projections.