it is worth noting that economic conditions on September 11, 2001, were similar to those in existence at the time of the Oklahoma City bombing (April 1995) and the Iraqi invasion of Kuwait (August 1990). In each instance, the U.S. economy was decelerating. In the case of the Oklahoma City bombing, the slowdown ended within 8 months. We now know that the U.S. economy had entered a recession (July 1990-March 1991) prior to the Iraqi invasion, so it is fair to say that neither of these comparable events caused the U.S. economy to dip into recession. Based on the information shown in Table 6.4, it is fair to say that economic trends underway before unprecedented economic and political events greatly influence their economic consequences. Obviously, the ultimate economic fallout from the terrorist attacks on New York City and Washington, DC, will not be known for quite some time.

Finally, experienced managers realize that significant time lags are often encountered between changes in the macroeconomy and their official recognition. Table 6.5 shows that NBER's Business Cycle Dating Committee usually waits 6 months to a year before officially recognizing that a major turning point in the economy has passed. This means that by the time a downturn in the economy is officially recognized, the subsequent upturn has already begun! Slow reporting, hard to decipher leads and lags in the overall economy, and unpredictable ties between economic and political events combine to make accurate macroeconomic forecasting one of the toughest challenges faced in managerial economics.

Was this article helpful?

0 0
Your Retirement Planning Guide

Your Retirement Planning Guide

Don't Blame Us If You End Up Enjoying Your Retired Life Like None Of Your Other Retired Friends. Already Freaked-Out About Your Retirement? Not Having Any Idea As To How You Should Be Planning For It? Started To Doubt If Your Later Years Would Really Be As Golden As They Promised? Fret Not Right Guidance Is Just Around The Corner.

Get My Free Ebook

Post a comment