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Abstract:
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The IMF's World Economic Outlook (WEO) provides forecasts for near-term global economic conditions. The forecasts have traditionally been prepared using a bottom up approach. Country desks prepare forecasts with a number of common assumptions, using a variety of models. These forecasts are then aggregated and scrutinized with global consistency checks. This decentralized approach has advantages, including flexibility and consideration of country-specific information, but also disadvantages, including limited scope in incorporating global constraints. This paper analyzes conceptual issues with decentralized forecasting, compares the WEO forecast performance with that of other forecasters, and discusses recent developments in using a mixture of bottom up and top down approaches to improve global consistency and model-based alternative scenarios to illustrate risks and policy options.
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