The subjective component in the model
It is possible also to classify the economy-impacting factors into two groups: exogenous and endogenous.
Table 1. Factors that mainly determined the economic situation, and that we take into account when our ∆P-index calculating. The situation for the 2022 year.
A rate of affecting
Monetary policy, the US Federal Reserve decisions
Money supply, interest rates, inflation
Volumes of natural resources consumed by the economy
The phase of the business cycle, the shock of supply
Exogenous and endogenous
Technologies by sectors of the economy
Relative prices for economic sectors, wages, and salaries, prices for production resources
Taxes and transfers
Demand /supply shocks
Both exogenous and endogenous factors can impact the economy.
Exogenous factors could impact the growth or lagging of the technological level of production equipment and independence from the supply chain in key industries such as construction, energy, and food production. Therefore, exogenous factors, as external forces cannot be controlled by the government or regulators directly. An exogenous factor is one that does not depend on factors within a particular economic system. Weather phenomena such as hurricanes, droughts, floods, earthquakes, and eruptions are exogenous in relation to the economy.
Political decisions like migration quotes, sanctions, import barriers, grants to innovations, or export support programs are endogenous. For example, hotel and travel-related businesses could be affected by changing border entrances, visa applications, or CLO control rules.
The State readiness prepared various scenarios for quickly responding to the potential impacts of exogenous factors and endogenous pro activity according to political promises is also counted in the model.
Undefined factors are quite many, the data for training the model and refinement of the prediction also appear with a delay, so to calculate the expectation associated with the frequency of occurrence earlier. To do this for every factor used a weighting factor of assumption. Assumptions are introduced through subjectively evaluated coefficients on a scale from 0 to 4. Check the table below.
Table 2 Factors affecting the accuracy of the economic forecast
Not fixed yet
From time to time constantly