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‘ The Environmental Limits on Returning to Economic Growth’   Break-Out Session One: Examples of Modelling and Forecasting...
The Regional Econometric Model Stuart Kielty Economic Reporting Manager Yorkshire Forward
Econometric Modeling – A Brief History <ul><li>The application of statistical analysis to understand economic theory </li>...
<ul><li>Developed for YF by Experian since 2001 </li></ul><ul><li>Equations locked Nationally level then ‘solved’ locally ...
The Regional Econometric Model
<ul><li>Forecasts Available For: </li></ul><ul><ul><li>- UK </li></ul></ul><ul><ul><li>- Yorkshire & Humber </li></ul></ul...
<ul><li>Employment Based Scenarios  </li></ul><ul><li>Understand the wider impact on your economy of: </li></ul><ul><ul><l...
The Regional Econometric Model
 
New Functionality in 2009/10 <ul><li>Improved Household Demographic Information </li></ul><ul><li>Environmental Impact Ass...
Improved Household Demographic Information <ul><li>Household projections consistent with the CLG household projections  </...
Improved Household Demographic Information <ul><li>Socio-Economic variables linked to economic forecasts </li></ul><ul><ul...
Environmental Impact Assessment Functionality <ul><li>In partnership with Stockholm Environmental Institute </li></ul><ul>...
Environmental Impact Assessment Functionality <ul><li>What if analysis: “If the manufacturing sector in Yorkshire grows/ d...
Improved Emissions Data <ul><li>Onsite and offsite (supply chain) emissions by 30 industrial sectors expressed in total vo...
Pre-Built Macro Economic Scenarios <ul><li>Various macro-economic variables which are adjustable, but too numerous </li></...
Any questions?
Forecasting & Futures Matt Waltho Research Manager
A word on RS2010… <ul><li>Requirements </li></ul><ul><li>Timeline </li></ul><ul><li>Forecasting & Futures </li></ul>
Why Regional Forecasting? <ul><li>A need for consistency </li></ul><ul><li>Shared understanding regionally and sub-regiona...
Why REFP? <ul><li>Gives independence </li></ul><ul><li>Objectivity  </li></ul><ul><li>Knowledge </li></ul><ul><li>Challeng...
Process <ul><li>Relative performance of the sub regions to the region </li></ul><ul><li>Looking at: </li></ul><ul><ul><li>...
What does the baseline look like? <ul><li>Relative to the REFP baseline in 2009 of 1.4% pa for 2008-15 and 2.1% 2015-30  <...
What would it mean if the sub-regional aspirations were realised? <ul><li>An uplift of 0.5pp in the long-term would mean …...
Northwest Futures 2030
Why Scenarios? <ul><li>The future is uncertain </li></ul><ul><li>Creative thinking </li></ul><ul><li>Looking at possible f...
Process <ul><li>Drivers of change </li></ul><ul><li>Axis of uncertainty </li></ul><ul><li>Scenarios on current RSS/RES </l...
Were better off  together… <ul><li>Healthy tech sector </li></ul><ul><li>Good basic level of public services </li></ul><ul...
A question of  privilege… <ul><li>Low taxes </li></ul><ul><li>Sense of place eroded </li></ul><ul><li>One person household...
Sticking together no matter what <ul><li>Strong sense of community </li></ul><ul><li>Home grown produce </li></ul><ul><li>...
Looking after  number 1 <ul><li>Recession dominates </li></ul><ul><li>Discontent polarised society </li></ul><ul><li>Unemp...
Summary <ul><li>Independent Forecasting allows … </li></ul><ul><ul><li>Assumptions to be challenged </li></ul></ul><ul><ul...
<ul><li>Questions? </li></ul>
‘ The Environmental Limits on Returning to Economic Growth’   Refreshment Break 15:00 – 15:15 Next break-out session start...
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Examples of Modelling & Forecasting - Stuart Kielty & Matt Waltho

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ARO Break Out Group 1 / Modelling & Forecasting - Yorkshire Forward Framework & North West Futures and Scenarios. These presentations were given on Wednesday 27th January 2010.

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Examples of Modelling & Forecasting - Stuart Kielty & Matt Waltho

  1. 1. ‘ 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
  2. 2. The Regional Econometric Model Stuart Kielty Economic Reporting Manager Yorkshire Forward
  3. 3. Econometric Modeling – A Brief History <ul><li>The application of statistical analysis to understand economic theory </li></ul><ul><li>Predominant use of regression analysis (testing the relationship between variables) </li></ul><ul><li>Currently used by central banks, governments and financial institutions to determine economic policy </li></ul><ul><li>Questioned very publically over the past two years…with obvious justification </li></ul>
  4. 4. <ul><li>Developed for YF by Experian since 2001 </li></ul><ul><li>Equations locked Nationally level then ‘solved’ locally </li></ul><ul><li>Currently updated quarterly in response to the recession </li></ul><ul><li>Main Functionality: </li></ul><ul><ul><li>economic forecasts </li></ul></ul><ul><ul><li>scenario modeling </li></ul></ul><ul><ul><li>key resource for accessing economic datasets </li></ul></ul>The Regional Econometric Model
  5. 5. The Regional Econometric Model
  6. 6. <ul><li>Forecasts Available For: </li></ul><ul><ul><li>- UK </li></ul></ul><ul><ul><li>- Yorkshire & Humber </li></ul></ul><ul><ul><li>- 21 Y&H LADs </li></ul></ul><ul><ul><li>- Sub Regions </li></ul></ul><ul><ul><li>- City Regions </li></ul></ul><ul><ul><li>- 30 industry sectors </li></ul></ul><ul><ul><li>- A 1986-2026 time period </li></ul></ul>The Regional Econometric Model
  7. 7. <ul><li>Employment Based Scenarios </li></ul><ul><li>Understand the wider impact on your economy of: </li></ul><ul><ul><li>Major Inward Investments </li></ul></ul><ul><ul><li>Job Creation Policy </li></ul></ul><ul><ul><li>Economic Shocks </li></ul></ul><ul><ul><li>Macroeconomic Changes </li></ul></ul><ul><li>Variables like displacement, leakage, multiplier effects and labour constraints taken in to account </li></ul>The Regional Econometric Model
  8. 8. The Regional Econometric Model
  9. 10. New Functionality in 2009/10 <ul><li>Improved Household Demographic Information </li></ul><ul><li>Environmental Impact Assessment Functionality </li></ul><ul><li>Pre-Built Macro Economic Scenarios </li></ul>
  10. 11. Improved Household Demographic Information <ul><li>Household projections consistent with the CLG household projections </li></ul><ul><ul><li>Includes household representative rates by age and gender </li></ul></ul><ul><ul><li>Includes institutional population and household population </li></ul></ul><ul><li>Will now derive scenario based household projections </li></ul>
  11. 12. Improved Household Demographic Information <ul><li>Socio-Economic variables linked to economic forecasts </li></ul><ul><ul><li>Cost of Living Index </li></ul></ul><ul><ul><li>Gross Household Income </li></ul></ul><ul><ul><li>Household Disposable Income </li></ul></ul><ul><ul><li>Unemployment Risk Index </li></ul></ul><ul><li>Linked to Core Economic Forecasts and Scenarios </li></ul>
  12. 13. Environmental Impact Assessment Functionality <ul><li>In partnership with Stockholm Environmental Institute </li></ul><ul><li>Using ONS Environmental Accounts </li></ul><ul><li>Sectoral ratios applied to model tied in with economic forecasts </li></ul><ul><ul><li>Energy use by industry </li></ul></ul><ul><ul><li>Airborne pollutants </li></ul></ul><ul><ul><li>Solid waste generation </li></ul></ul>
  13. 14. Environmental Impact Assessment Functionality <ul><li>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?” </li></ul><ul><li>Potential to help with Environmental Assessments </li></ul><ul><ul><ul><li>modelling the associated emissions of investments in industries </li></ul></ul></ul><ul><ul><ul><li>Resource efficiency </li></ul></ul></ul>
  14. 15. Improved Emissions Data <ul><li>Onsite and offsite (supply chain) emissions by 30 industrial sectors expressed in total volumes and per unit of output / GVA (production based emissions) </li></ul><ul><li>Consumer emissions associated with government expenditure and household demand for 40+ product groups (consumption based emissions) </li></ul><ul><li>Link economic forecasts to household income, expenditure patterns and a range of environmental impacts. </li></ul><ul><li>Work split into stages but completed in November 2009 </li></ul>
  15. 16. Pre-Built Macro Economic Scenarios <ul><li>Various macro-economic variables which are adjustable, but too numerous </li></ul><ul><li>Need to test macro economic scenarios without too much ‘guessing’ </li></ul><ul><li>Pre-built scenarios based on: </li></ul><ul><ul><li>HM Treasury’s 2009 Budget Forecast </li></ul></ul><ul><ul><li>Experian’s Core Forecast </li></ul></ul><ul><ul><li>IMF’s 2009 UK Forecast </li></ul></ul>
  16. 17. Any questions?
  17. 18. Forecasting & Futures Matt Waltho Research Manager
  18. 19. A word on RS2010… <ul><li>Requirements </li></ul><ul><li>Timeline </li></ul><ul><li>Forecasting & Futures </li></ul>
  19. 20. Why Regional Forecasting? <ul><li>A need for consistency </li></ul><ul><li>Shared understanding regionally and sub-regionally </li></ul><ul><li>One agreed starting point </li></ul><ul><li>Understanding the impacts of the forecast </li></ul><ul><li>Understanding the inputs </li></ul>
  20. 21. Why REFP? <ul><li>Gives independence </li></ul><ul><li>Objectivity </li></ul><ul><li>Knowledge </li></ul><ul><li>Challenge </li></ul>
  21. 22. Process <ul><li>Relative performance of the sub regions to the region </li></ul><ul><li>Looking at: </li></ul><ul><ul><li>Population: changes in total and working age </li></ul></ul><ul><ul><li>Employment: Changes in employment and jobs </li></ul></ul><ul><ul><li>Productivity: changes in GVA per job </li></ul></ul><ul><ul><li>Productivity drivers: enterprise, skills, innovation and investment </li></ul></ul><ul><li>2 periods 2008-15 and 2015-30 </li></ul>
  22. 23. What does the baseline look like? <ul><li>Relative to the REFP baseline in 2009 of 1.4% pa for 2008-15 and 2.1% 2015-30 </li></ul><ul><li>C&W 0.2pp and 0.06pp above </li></ul><ul><li>Cumbria 0.4pp below </li></ul><ul><li>GManch 0.2pp and 0.1pp above </li></ul><ul><li>Lancs 0.3pp below and 0.2pp below </li></ul><ul><li>Merseyside 0.1pa and 0.02 below </li></ul>
  23. 24. What would it mean if the sub-regional aspirations were realised? <ul><li>An uplift of 0.5pp in the long-term would mean … </li></ul><ul><ul><li>an extra £16bn in total GVA by 2030 (compared to the baseline scenario) </li></ul></ul><ul><ul><li>and a GVA per head of £24,500 by 2030 (compared to a baseline of £22,600) </li></ul></ul><ul><ul><li>uplift weighted towards second period as “interventions” take effect </li></ul></ul>Regional baseline & aspirational GVA growth rates (% pa)
  24. 25. Northwest Futures 2030
  25. 26. Why Scenarios? <ul><li>The future is uncertain </li></ul><ul><li>Creative thinking </li></ul><ul><li>Looking at possible futures </li></ul><ul><li>What creates change? </li></ul>
  26. 27. Process <ul><li>Drivers of change </li></ul><ul><li>Axis of uncertainty </li></ul><ul><li>Scenarios on current RSS/RES </li></ul><ul><li>Scenarios on draft RS2010 </li></ul>
  27. 28. Were better off together… <ul><li>Healthy tech sector </li></ul><ul><li>Good basic level of public services </li></ul><ul><li>State pension retained </li></ul><ul><li>Emission restrictions on dwellings </li></ul><ul><li>UK’s first high-speed rail </li></ul><ul><li>Car ownership plummets </li></ul><ul><li>Carbon quotas introduced </li></ul><ul><li>Booming leisure industry </li></ul><ul><li>Social enterprise mainstreamed </li></ul>
  28. 29. A question of privilege… <ul><li>Low taxes </li></ul><ul><li>Sense of place eroded </li></ul><ul><li>One person households </li></ul><ul><li>Lack of social mobility </li></ul><ul><li>Two tier food procurement </li></ul><ul><li>Stress related illness </li></ul><ul><li>Congestion </li></ul><ul><li>Urban heat islands </li></ul><ul><li>Selfish and lonely society </li></ul>
  29. 30. Sticking together no matter what <ul><li>Strong sense of community </li></ul><ul><li>Home grown produce </li></ul><ul><li>Shared households </li></ul><ul><li>Co-ownership </li></ul><ul><li>Cycling </li></ul><ul><li>Vegetarianism </li></ul><ul><li>Reduced energy consumption </li></ul><ul><li>Single Double Summer Time </li></ul><ul><li>Low economic growth </li></ul>
  30. 31. Looking after number 1 <ul><li>Recession dominates </li></ul><ul><li>Discontent polarised society </li></ul><ul><li>Unemployment </li></ul><ul><li>Light regulation for business </li></ul><ul><li>Virtual leisure </li></ul><ul><li>Local provision of services </li></ul>
  31. 32. Summary <ul><li>Independent Forecasting allows … </li></ul><ul><ul><li>Assumptions to be challenged </li></ul></ul><ul><ul><li>Open dialogue on relative performance </li></ul></ul><ul><ul><li>Agreed baseline to work from </li></ul></ul><ul><li>Scenarios </li></ul><ul><ul><li>Creative thinking on possible futures </li></ul></ul><ul><ul><li>Agreement on key drivers of change </li></ul></ul><ul><ul><li>Possibility of genuine transformation </li></ul></ul>
  32. 33. <ul><li>Questions? </li></ul>
  33. 34. ‘ The Environmental Limits on Returning to Economic Growth’ Refreshment Break 15:00 – 15:15 Next break-out session starts 15:15

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