The Kiel Institute's Business Cycle Forecast of winter from December 12, 2018
As a part of applied economic research, economic forecasting combines theoretical reasoning with empirical research. Thinking ahead of the present based on sound economics and relevant data is our passion. Of course, no matter how hard economists try, the future remains inherently uncertain. As business cycle researchers we strive for detecting typical patterns in economic development, not for deterministic paths. Economic processes are driven by human action that – framed by the institutional environment – remains open to individual choices. However, the results are typically not left to pure chance. The regular patterns of macroeconomic trends and fluctuations are the basis of our scientific work and the predictions we derive from it. Forecasting exercises are important for systematic economic decision making (both for governments and corporates) and by producing foresight they serve as an early warning system for unsustainable developments.
Scientific forecasting does not excel by being always right but by allowing for inter-subjective comprehension. Explaining the methodology, clarifying assumptions, and assessing risks are indispensable to an adequate understanding of forecasts. In our comprehensive business cycle reports you find all that. Clearly, forecasting as we see it is much more than number crunching.
In the economic sphere, an act, a habit, an institution, a law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them.