Scenario-driven forecasting: Modeling peaks and paths. Insights from the COVID-19 Pandemic in Belgium

Kristof Decock, Koenraad Debackere, Anne Mieke Vandamme and Bart Van Looy

No 655122, Working Papers of Department of Management, Strategy and Innovation, Leuven from KU Leuven, Faculty of Economics and Business (FEB), Department of Management, Strategy and Innovation, Leuven

Abstract: The recent ‘outburst’ of COVID-19 spurred efforts to model and forecast its diffusion patterns, either in terms of infections, people in need of medical assistance (ICU occupation) or casualties. Forecasting patterns and their implied end states remains cumbersome when few (stochastic) data points are available during the early stage of diffusion processes. Extrapolations based on compounded growth rates do not account for inflection points nor end-states. In order to remedy this situation, we advance a set of heuristics which combine forecasting and scenario thinking. Inspired by scenario thinking we allow for a broad range of end states (and their implied growth dynamics, parameters) which are consecutively being assessed in terms of how well they coincide with actual observations. When applying this approach to the diffusion of COVID-19, it becomes clear that combining potential end states with unfolding trajectories provides a better-informed decision space as short term predictions are accurate, while a portfolio of different end states informs the long view. The creation of such a decision space requires temporal distance. Only to the extent that one refrains from incorporating more recent data, more plausible end states become visible. Such dynamic approach also allows one to assess the potential effects of mitigating measures. As such, our contribution implies a plea for dynamically blending forecasting algorithms and scenario-oriented thinking, rather than conceiving them as substitutes or complements.

Pages: 16
Date: 2020-05-28
New Economics Papers: this item is included in nep-for
Note: paper number MSI_2010
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Published in FEB Research Report MSI_2010, pages 1-16

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