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A load of crystal balls

Editor: Peter Lee


The IMF is spoiling to get even with its critics. Stung by claims that it missed signals warning of the Asian crisis, gumshoe economists at the Fund have been checking out the record of private forecasters. The results are not flattering.

Bad forecasts have been the butt of many jokes. "But the fact is," says Victor Zarnowitz, "you can't do without them. So how good or how bad forecasts are is a question of great importance." Zarnowitz is a retired professor from the University of Chicago and now research director at the Foundation for International Business and Economic Research in New York.

New IMF research, recently aired at a Federal Reserve seminar, should therefore cause a stir. The paper, due out from the Fund this month, found that private forecasts failed to predict a year beforehand any of the recessions since 1989. There were 39, to be exact, in the countries covered by the study. These setbacks included the US recession in 1991 as well as downturns in Hungary and Poland the same year, the exchange rate mechanism crisis and related European recessions in 1992-93 together with the Mexican peso collapse in 1994-95 and, of course, the Asian and Russian debacles.