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