Should business rely on business cycle forecasting?

Tobias F. Rötheli ()
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Tobias F. Rötheli: University of Erfurt

Central European Journal of Operations Research, 2018, vol. 26, issue 1, No 5, 133 pages

Abstract: Abstract We investigate the circumstances in which business cycle forecasting is beneficial for business by addressing both the short-run and the long-run aspects. For an assessment of short-run forecasting we make a distinction between using publicly available information of cycle probabilities and the use of resources to sharpen this outlook. A sharpened forecast can pay off because it helps the firm to optimally select its output mix. For a long-run perspective we show that firms whose optimal level of operation varies with varying selling prices gain from an accurate assessment of the likelihood of the states of expansion and recession. Petroleum refining in the U.S. is econometrically studied as an exemplary industry. The results document cyclical regularities that indicate that forecasting is advantageous for firms in this industry.

Keywords: Forecasting; Business cycle; Planning; Strategic management (search for similar items in EconPapers)
JEL-codes: E32 E37 L21 M21 (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1007/s10100-017-0477-8

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