Economic forecasting for banking

Forecasting is a key ingredient of decision making both in the public and in the private sector. It is particularly important in the context of banking, both for their management and for their supervision. Banks’ assets and liabilities are influenced by a number of factors, such as general economic and financial conditions, interest rates, and the prices of financial assets. As these variables are the result of a vast, complex, dynamic and stochastic system, forecasting them is very difficult and forecast errors are unavoidable. Yet, forecast errors can be reduced and forecast precision enhanced by using proper econometric models and methods. This course provides a primer on econometric methods for forecasting economic and financial variables relevant in a banking context, and it also discusses some more advanced topics related to forecast construction and evaluation.