The Temporal Order of Expectations: Short- and Long-Term Expectations around the Great Recession

• In Event: Scenarios Beyond Imagination: What Is Imaginable? and What Is Not?

Abstract

By delineating how events are likely to unfold, economic forecasts provide guidelines for action, shape “fictional expectations” and enable scenario-building. Yet, they often face criticisms for missing to foresee major economic downturns. To what extent do forecasting failures lead to crises of expectations? Obviously, during economic busts, economic actors’ expectations adapt to a new state of affairs: they imagine “alternative” futures, which newly-produced forecasts and revised scenarios encapsulate. However, the importance of these shifts is disputed, according to the perceived weight of forecasts in decision-making.
This presentation focuses on shifts in expectations amidst economic crises. The presentation uses the case of macroeconomic forecasting in the wake of the Great Recession to study the consequences of real-world breakdowns on anticipation devices. It exposes early results of an ongoing research of macroeconomic forecasting, and empirically consists in the analysis of forecasts produced by three different institutions (IMF, CBO, and OECD between 2006 and the mid-2010s).
It claims the temporal order of expectations (especially, whether their horizon is short- or long-term) matters to understand the magnitude of their changes. Forecasting institutions produces forecasts for varying horizon, ranging from one quarter to ten years in advance. It raises issues regarding how economics deal with time. Specifically, the presentation will test the hypothesis according to which time horizons are associated with different theoretical settings: whereas short-term forecasts would rely on conjuncture analysis and would consequently be prone to revisions, long-term forecasts would express economic structures, and would therefore be immune to massive reassessments.

Author

• Olivier Pilmis, CNRS - Centre de Sociologie des Organisations