Economist calls for new model
Crash forecast failure ‘is Bank’s Fish moment’
The Bank of England’s chief economist has likened its failure to predict the 2008 financial crisis to BBC weatherman Michael Fish’s fateful forecast on the eve of the 1987 hurricane.
Andy Haldane said the models used before the crash did not account for crises in the financial system.
In comments on the financial meltdown, he said: “Could we find a way out of the trap? Of course we could. Let’s go back to a different crisis, which is the crisis, not in economic forecasting but in weather forecasting, that resulted from the 1987 storm.”
He quoted Mr Fish’s famous comment: “A woman rang the BBC and said that she’d heard there was a hurricane on the way. If you’re watching, don’t worry, there isn’t.”
Mr Haldane said: “Very similar to the sort of reports central banks – naming no names – issued pre-crisis, ‘There is no hurricane coming but it might be very windy in the sub-prime sector.'”
Mr Haldane, speaking to the Institute for Government in London, said that economic forecasting could be improved by using more data, just as weather forecasting has improved in the nearly-30 years since the 1987 storm.
He added that there was a “disconnect” between political warnings about Brexit and the “remarkably placid” state of the markets.