Baseline forecasts and alternative scenarios for more than 50 countries, updated monthly, for evaluating shocks and differing economic assumptions.
Moody's Analytics forecasts with alternative scenarios are the foundation of stress testing, regulatory compliance, and "what if?" analysis. Our scenarios are produced by a team of more than 80 economists and nearly 20 data specialists located around the world and enable clients—banks, corporations, governments and regulators—to test the impact of shocks and differing economic assumptions on their businesses and portfolios.
Our scenario-driven approach to forecasting begins with our baseline forecast. We define this as the “most likely outcome” based on current conditions and our view of where the economy is headed. From this we develop the basic outlines of our alternative scenarios by running multiple simulations to develop a probability distribution of economic outcomes. We then produce fully-fledged economic scenarios that align with this probability distribution, as example:
- S1 - Stronger Near-Term Rebound
- BL - Baseline Forecast
- S2 - Slower Near-Term Recovery
- S3 - Moderate Recession
- S4 - Protracted Slump
- S5 - Below-Trend Long-Term Growth
- S6 - Oil Price Increase, Dollar Crash
- S7 - Next-Cycle Recession (US Only)
- S8 - Low Oil Price
- CS - Constant Severity (Independent of current business cycle conditions)
Some of scenarios are cyclical-that is, they extend only through the current business cycle, with the no change in the economy’s long-run growth rate. Others are longer term, with different long-run growth rates compared to the baseline. For each alternative scenario we provide an economic narrative, explaining what would cause the change in the outlook relative to the baseline. That story changes over time as underlying economic conditions change.
- Dynamic systems of equations representing the components of aggregate demand and supply.
- Quarterly or monthly re-estimation of equations for model robustness and forecasting accuracy.
- Time-series and panel-data econometric techniques brought forward into the estimation process.
- Monte Carlo simulations implemented to generate deviations from our median/baseline forecast and to produce empirical probability distributions.
- Baseline and alternative scenarios for more than 50 countries, including the US and all states and metropolitan areas.
- 30-year forecast horizon.
- Concept coverage for alternative scenarios is the same as for our baseline forecasts.
- Monthly updates, using the latest economic data and conditions.
- Narratives for each scenario detailing forecast assumptions.
Offerings With Alternative Scenarios
All products listed below have packaged options that deliver alternative forecasts along with baseline forecasts. Please contact us for any specialized requests.
- Accuracy and Consistency
Analyze with confidence using forecasts and scenarios produced, vetted and maintained by our international team of more than 80 experienced economists.
Account for the most recent data and conditions with our monthly updated Standard Alternative Scenarios, or leverage our highly experienced team to develop custom scenarios on any schedule you need.
Take advantage of scenarios that include a comprehensive set of economic indicators, covering not just headline numbers but all concepts relevant for portfolio modeling and stress-testing.
Fully understand the underlying assumptions for each scenario with documented methodologies, monthly narratives, and complete access to our economists.
Run comprehensive, transparent and consistent stress-tests on your portfolios, translating scenarios into stressed conditions for credit, market, liquidity and operational risk.
- Business Planning
Understand the impact of potential economic outcomes on the performance of portfolios.
- Risk Management
Expose possible vulnerabilities to better manage risk.
- Validation and Testing
Test internal models to validate results and assumptions.
- Regulatory Requirements
Meet regulatory requirements with fully documented and transparent models and methodologies from an independent source.