Communication Strategies for Economic Forecasts and Policy Simulations

1. Communication Strategies for Economic Forecasts and Policy Simulations Economic Modelling and Forecasting Project in Ukraine October, 2001

2. An Appropriate Communications Strategy is Key For Success • Preparing an economic outlook or policy simulation is of little value if there is a failure to effectively communicate the results

3. The Guiding Principles • Understand the Audience • Define your Message • Understand the Forecasting Tool • Know the Material

4. Applications of Macroeconomic Models • Baseline Economic Outlooks • Alternative Scenarios • Shock-Minus-Control Analysis • Policy Simulations

5. Economic Outlooks • Understand the Audience • Define the Message • Understand the Forecasting Tool • Know the Material

6. Economic OutlooksUnderstand the Audience • It is essential to tailor communication to the needs and expertise of the audience • Try to put yourself in the shoes of your audience • Seek feedback on the effectiveness of the communication from the target audiences

7. Economic OutlooksGovernment Sector: Typical Audiences • Internal Senior Management • Peers in Other Departments • Private Sector Senior Management • Private Sector Analysts • Media • The Public

8. Economic OutlooksPrivate Sector: Typical Audiences • Internal Senior Management • Customers: Senior Management • Customers: Analysts • Media

9. Economic OutlooksUnderstand the Audience • Audiences can usually be safely grouped together if they have similar needs and similar levels of expertise • Review your assumptions about your audiences • Effective communication begins with a thorough understanding of the audience

10. Economic OutlooksDefine the Message • The key is to have a clear understanding of your message • Usually three to five Key Messages • The Message must be tailored to the needs and characteristics of the audience • Context is Crucial

11. Economic OutlooksUnderstand the Tool (I) • Macroeconomic Models are only one tool used to prepare economic forecasts • Other tools include time series analysis, leading indicators and ‘rules of thumb’ • The model is not a perfect reflection of reality.

12. Economic OutlooksUnderstand the Tool(II) • Econometric Model forecasts are based on a set of assumptions • The assumptions are partly embodied in the forecasts of the exogenous variables • How are you forecasting the exogenous variables? Judgement? Satellite Models? • Assumptions are also embodied in adjustments to the stochastic equations when they are unable to capture special events ( e.g., strikes, policy changes).

13. Economic OutlooksUnderstand the Tool(III) • Identify the Forecast Assumptions that are important for your audience • Context is crucial • The key forecast assumptions will depend upon your key messages and your audience • The key assumptions must be communicated to the audience up front.

14. Economic OutlooksUnderstand the Tool(IV) • You will never be perfectly accurate • Don’t spend time talking about the tool --only discuss the tool in response to questions or in technical forums • Keep the discussion focussed on key assumptions and key messages • Don’t be afraid to admit to failure -- be prepared to discuss what went wrong • NEVER cling to an outdated forecast

15. Economic OutlooksKnow the Material • Be able to defend the key assumptions • Know which assumptions are critical • Be able to trace the causal path from key assumptions to important outcomes • Discuss risks and assign probabilities • Risks can be used to develop alternative scenarios • Anticipate Questions

16. Economic OutlooksTypical Communication Structure I. Highlights II. Key Messages III. Exogenous Assumptions - discussed -defended IV. Causal Links to Key Outcomes V. Risks VI. Conclusion that repeats key messages

17. Economic OutlooksGovernment Sector: Typical Audience Senior Management Characteristics: • No time • Sensitive to political implications of outlook • Risk Sensitive • Low level of technical expertise

18. Economic OutlooksGovernment Sector: Typical Audience Senior Management Needs: • Economic outlook for budget planning • Economic outlook for policy design • Economic outlook for political “heads up”

19. Economic OutlooksGovernment Sector: Typical Audience Senior Management Hardcopy Communication Design: • Brief: two to three pages • No technical content; no economic jargon • No time for much discussion around assumptions or causal links • Give greater than normal weight to Risk Assessment

20. Economic OutlooksPrivate Sector: Typical Audience Customer Analysts Characteristics: • Time is available • Moderate Degree of Technical Expertise • Skeptical regarding forecast accuracy • Little interest in technical details

21. Economic OutlooksPrivate Sector: Typical Audience Customer Analysts Needs: • Timely forecast for their planning cycle • Warning of adverse economic developments • In-depth analysis for briefing their senior management • Machine readable data for custom reports

22. Economic OutlooksPrivate Sector: Typical Audience Customer Analysts Hardcopy Communication Design: • Publication: twenty pages of in-depth analysis plus executive summary • Careful defence of assumptions • In-depth tracing of causal links • Careful assessment of risk

23. Policy Simulations • Understand the Audience • Define the Message • Understand the Tool • Know the Material

24. Policy SimulationsDefine the Audience • It is essential to tailor communication to the needs and expertise of the audience • Try to put yourself in the shoes of your audience

25. Policy SimulationsGovernment Sector: Typical Audiences • Internal Senior Management • Peers in Other Departments • Often Confidential

26. Policy SimulationsPrivate Sector: Typical Audiences • Internal Senior Management • Customers: Senior Management • Customers: Analysts • Media

27. Policy SimulationsDefine the Message • Key messages are normally the impacts of the policy change • Status quo is a policy option and often provides the baseline for impact measurement • Provide Alternatives • Analyze Risks to create boundaries around the impact • Be Sensitive to the Political Context

28. Policy SimulationsUnderstand the Tool (I) • Macroeconomic models are the tool of choice to generate policy simulations • Other tools exist. • The model is not a perfect reflection of reality.

29. Policy SimulationsUnderstand the Tool(II) • Econometric Models are aggregated and coarse; reality is disaggregated and detailed. • A careful understanding of the structure and dynamics of the model is crucial • This understanding is partly based on standard shocks • Modelling a policy initiative often requires adjusting existing equations

30. Policy SimulationsUnderstand the Tool(III) • Avoid the use of judgement • Watch for unintended consequences; example: Canada doubles taxes on cigarettes and smuggling explodes • Markets work • Try to anticipate surprises • Provide alternatives

31. Policy SimulationsKnow the Material • Be able to defend the modelling of the policy changes • Be able to trace the causal path from key assumptions to important outcomes • Be able to discuss risks with assigned probabilities • Buttress policy recommendations with evidence from other tools

32. The Communications Strategy for Economic Outlooks at the Conference Board of Canada (I) Audiences • Customers: Senior Management • Customers: Analysts • Media

33. Audience: Customers, Senior Management • No time • Risk Sensitive • Low level of technical expertise • Need outlooks to critique business plans received from staff

34. Audience: Customers, Analysts • Time is available for analysis • Moderate level of technical expertise • Need outlooks to prepare and update business plans and brief senior management on latest developments • Some need data in a very timely fashion and in machine readable format

35. Audience: Media • Work to immediate deadlines • No time for analysis • No technical expertise • Need one key message delivered in a fashion easily understood by the general public

36. The Communications Strategy for Economic Outlooks at the Conference Board of Canada (II) Communication Vehicles (Chronological Order) • On-line data delivery • Forecast Executive Summary delivered on-line • Forecast Executive Summary mailed • Outlook Publication mailed continued….

37. Communication Vehicles (Chronological Order) • Press Release • Technical Forecasting Seminar • Economic Outlook Conferences

38. Communication Vehicle: On-Line Forecast Data Delivery • Audience: More sophisticated analysts in government and working for large corporations • Needs fulfilled: - timely access to information - machine-readable data which can be fed into an automated business planning process

39. Communication Vehicle: Forecast Executive Summary Delivered On-Line • Audiences: a) More sophisticated analysts in government and working for large corporations b) Senior Management with on-line expertise • Need fulfilled: timely access to summary description of the outlook

40. Communication Vehicle: Forecast Executive Summary Mailed • Audiences: a) Analysts in government and working for large corporations b) Senior Management • Need fulfilled: summary description of the outlook

41. Communication Vehicle: Outlook Publication Mailed • Audience: -Analysts in government and working for large corporations • Need fulfilled: in-depth analysis of the outlook used to tune business plans at the sectoral level and justify business plans to senior management

42. Communication Vehicle: Press Release • Audience: Media • Need fulfilled: ability to provide important information to their customers

43. Communication Vehicle: Economic Outlook Seminars and Conferences • Audiences: Senior Management; Analysts; Media • Need fulfilled: ability to interact personally with senior Conference Board Staff

44. Communication Resources at the Conference Board of Canada • Forecast Specialists • On-line support staff • Editors • Layout designers • Mailroom • Spokespersons • Media Relations • Conference Support Staff

45. Communication Training at the Conference Board of Canada • Writing Skills • Presentation Skills • Media Training

46. An Example of an Outlook Presentation Audience: Financial Planners - moderately sophisticated - need the outlook for planning purposes - need the ability to ask questions - risk sensitive - special interest in interest rates and the exchange rate

47. Key Messages • About the impact of the terrorist attack • About the probability of a full-blown recession • About the importance of Confidence and the high degree of risk around the outlook

48. Tragedy,Confidence & The FuturePlanning for a Very Uncertain 2002 CS Co-Op and CS Alterna Bank Strategic Planning Retreat September 29, 2001 Paul M. Darby Director, Economic Forecasting

49. What We Will Talk About • Economic growth is very slow— but full-blown recession very unlikely • How will that affect your customers and business? • The importance of Confidence • The outlook is risky

50. Prospects Outside Canada 2002 • Extreme uncertainty after terrorist attacks • U.S. slowdown a reality, but no full-blown “R” in 2001; growth strengthens in 2002 • Japan remains mired in difficulties • Europe just holding its own