Factors Influencing Reliability Forecast
The forecast done by any method has its own limitations. The analyst should try to get as close as possible by analysing the past data as extensively as possible and then applying the most appropriate method.
As far as the method used here is concerned, we can say that this is the best method for the given data set. The data of past years clearly show a seasonal characteristic which should be considered and this is what exactly the method used does accurately. The second residual found in the above table is an indicator of the accuracy of the forecasts. In case of residual, the smaller the values, the better the forecast. The same is depicted in the diagram shown above. The actual data line and the forecasted data line almost coincide with each other. So, we can’t say that the forecast will exactly coincide with the actual, but it can be assured that this is the best that we can get.
External factors influencing the Forecast
On normal conditions, the forecast provides almost actual values. However, the forecast can’t be reliable in extra ordinary situations. There are many factors which influences the forecast. Any irregularity in any of these factors may cause the forecast to be useless. These influencing factors are:
- Change in overall economic condition
- Change in disposable income of the people
- Change in the preferences of the people in general
- Change in governments’ policies towards this section of the expenditure of the people
- Change in supply side economics
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