Examples of Modelling & Forecasting - Stuart Kielty & Matt Waltho

‘ The Environmental Limits on Returning to Economic Growth’ Break-Out Session One: Examples of Modelling and Forecasting With Stuart Kielty, Matt Waltho and Gavin Bewick

The Regional Econometric Model Stuart Kielty Economic Reporting Manager Yorkshire Forward

Econometric Modeling – A Brief History
The application of statistical analysis to understand economic theory
Predominant use of regression analysis (testing the relationship between variables)
Currently used by central banks, governments and financial institutions to determine economic policy
Questioned very publically over the past two years…with obvious justification

Developed for YF by Experian since 2001
Equations locked Nationally level then ‘solved’ locally
Currently updated quarterly in response to the recession
Main Functionality:
economic forecasts
scenario modeling
key resource for accessing economic datasets
The Regional Econometric Model

Forecasts Available For:
- UK
- Yorkshire & Humber
- 21 Y&H LADs
- Sub Regions
- City Regions
- 30 industry sectors
- A 1986-2026 time period

Employment Based Scenarios
Understand the wider impact on your economy of:
Major Inward Investments
Job Creation Policy
Economic Shocks
Macroeconomic Changes
Variables like displacement, leakage, multiplier effects and labour constraints taken in to account

New Functionality in 2009/10
Improved Household Demographic Information
Environmental Impact Assessment Functionality
Pre-Built Macro Economic Scenarios

Household projections consistent with the CLG household projections
Includes household representative rates by age and gender
Includes institutional population and household population
Will now derive scenario based household projections

Socio-Economic variables linked to economic forecasts
Cost of Living Index
Gross Household Income
Household Disposable Income
Unemployment Risk Index
Linked to Core Economic Forecasts and Scenarios

In partnership with Stockholm Environmental Institute
Using ONS Environmental Accounts
Sectoral ratios applied to model tied in with economic forecasts
Energy use by industry
Airborne pollutants
Solid waste generation

What if analysis: “If the manufacturing sector in Yorkshire grows/ declines by 5% in the next three years, how will the regions’ greenhouse gas emissions change?”
Potential to help with Environmental Assessments
modelling the associated emissions of investments in industries
Resource efficiency

Improved Emissions Data
Onsite and offsite (supply chain) emissions by 30 industrial sectors expressed in total volumes and per unit of output / GVA (production based emissions)
Consumer emissions associated with government expenditure and household demand for 40+ product groups (consumption based emissions)
Link economic forecasts to household income, expenditure patterns and a range of environmental impacts.
Work split into stages but completed in November 2009

Pre-Built Macro Economic Scenarios
Various macro-economic variables which are adjustable, but too numerous
Need to test macro economic scenarios without too much ‘guessing’
Pre-built scenarios based on:
HM Treasury’s 2009 Budget Forecast
Experian’s Core Forecast
IMF’s 2009 UK Forecast

Any questions?

Forecasting & Futures Matt Waltho Research Manager

A word on RS2010…
Requirements
Timeline
Forecasting & Futures

Why Regional Forecasting?
A need for consistency
Shared understanding regionally and sub-regionally
One agreed starting point
Understanding the impacts of the forecast
Understanding the inputs

Why REFP?
Gives independence
Objectivity
Knowledge
Challenge

Process
Relative performance of the sub regions to the region
Looking at:
Population: changes in total and working age
Employment: Changes in employment and jobs
Productivity: changes in GVA per job
Productivity drivers: enterprise, skills, innovation and investment
2 periods 2008-15 and 2015-30

What does the baseline look like?
Relative to the REFP baseline in 2009 of 1.4% pa for 2008-15 and 2.1% 2015-30
C&W 0.2pp and 0.06pp above
Cumbria 0.4pp below
GManch 0.2pp and 0.1pp above
Lancs 0.3pp below and 0.2pp below
Merseyside 0.1pa and 0.02 below

What would it mean if the sub-regional aspirations were realised?
An uplift of 0.5pp in the long-term would mean …
an extra £16bn in total GVA by 2030 (compared to the baseline scenario)
and a GVA per head of £24,500 by 2030 (compared to a baseline of £22,600)
uplift weighted towards second period as “interventions” take effect
Regional baseline & aspirational GVA growth rates (% pa)

Northwest Futures 2030

Why Scenarios?
The future is uncertain
Creative thinking
Looking at possible futures
What creates change?

Process
Drivers of change
Axis of uncertainty
Scenarios on current RSS/RES
Scenarios on draft RS2010

Were better off together…
Healthy tech sector
Good basic level of public services
State pension retained
Emission restrictions on dwellings
UK’s first high-speed rail
Car ownership plummets
Carbon quotas introduced
Booming leisure industry
Social enterprise mainstreamed

A question of privilege…
Low taxes
Sense of place eroded
One person households
Lack of social mobility
Two tier food procurement
Stress related illness
Congestion
Urban heat islands
Selfish and lonely society

Sticking together no matter what
Strong sense of community
Home grown produce
Shared households
Co-ownership
Cycling
Vegetarianism
Reduced energy consumption
Single Double Summer Time
Low economic growth

Looking after number 1
Recession dominates
Discontent polarised society
Unemployment
Light regulation for business
Virtual leisure
Local provision of services

Summary
Independent Forecasting allows …
Assumptions to be challenged
Open dialogue on relative performance
Agreed baseline to work from
Scenarios
Creative thinking on possible futures
Agreement on key drivers of change
Possibility of genuine transformation

Questions?

‘ The Environmental Limits on Returning to Economic Growth’ Refreshment Break 15:00 – 15:15 Next break-out session starts 15:15

Examples of Modelling & Forecasting - Stuart Kielty & Matt Waltho

by Andy Dunne on Feb 02, 2010

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Examples of Modelling & Forecasting - Stuart Kielty & Matt Waltho — Presentation Transcript

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