Checklist Approach

If you're planning a big "do it yourself" home renovation, what might be a good approach to making sure you have all the right tools and supplies?

That's not it. Basic coordination of economic data won't be super time intensive.

Yes, that's right. Analysts cast a wide net to analyze lots of economic data points. That's why the checklist approach takes such a long time. Even after all data points have been checked, analysts must still develop forecasts by using objective statistical methods (like time-series methods) or more subjective or judgmental means.

Not quite. Analysts are going to check on multiple data sources to confirm economic trends.

To start the checklist process, you might focus on economic indicators that are listed in the minutes of central bank meetings. Then you'll develop specific categories for analysis. For example, you might develop a checklist approach for economic growth that focuses on spending components like unemployment, business cycle, GDP growth, output gap, and inventory levels.

But you'll need to be careful, because using a checklist has one major drawback. When you consider how the entire process unfolds, including how the checklist is created, what's a major disadvantage?

Indeed. The analyst applying the checklist approach actually sets the data points to check, which means some subjective biases can sneak into the checklist. But this subjectivity can also turn into a positive because the analyst has the ability to be flexible when the economy changes. By changing the weights on specific economic factors, the analyst can update the forecast in real time.

No, actually. The volume of data allows for a comprehensive approach.

That's not it. Weighting the economic factors isn't a positive or negative. It's just part of the process.

In sum: [[summary]]

Right. If you're planning to complete a big project, from the moment you decide to take on this task, planning for all the supplies and tools needed for the project will take lots of time and coordination. (Not to mention learning the skills, and then actually doing the work.) The best way to start tackling big projects is with a checklist.

That's not likely to work. A renovation project is going to require project-specific tools and supplies. Unless you've got a hardware store in your backyard, you'll probably have to take another approach.

Well, no. That's one option, but it's slightly outside the realm of DIY.

A checklist approach can be used in economic forecasting, too. It'll help get things organized. That doesn't mean it's not time consuming, though. A checklist approach takes lots of coordination. Why would the checklist approach involve such detail and time?

Give up and hire a contractor

Make a list and tick items off as you go

Make do with whatever is already on hand

Subjectivity

Volume of data

Weighting the various economic factors

Analysts work from basic trends in data

Analysts use the widest possible range of data

Analysts dig into the details on specific economic trends

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