New York, NY, July 29, 2015 --(PR.com
)-- With the global economy still operating below its pre-2008 growth potential, the clear understanding of various economic & financial market mechanisms is crucial. One of the major issues facing the policy-makers as well as the decision-makers at big corporations is how to make sense of the complexity of ever increasing linkages between the countries, people and companies. Empirical Foresights, a research and advisory firm, has been working towards tackling that problem.
"It is a typical tragedy of commons problem. It should be possible to estimate the impact of a significant shock in one sector in a country to a sector or a big company in another country. But to do so would require the companies and countries to look at the data beyond their boundaries and then model various dependencies," says Abhay Gupta, Chief Economist at the firm. "The companies think that it is government's job to monitor broader trends or respond to the shocks and thus do not allocate their resources optimally. Governments think they are only responsible for the outputs in their countries and fail to account for the role of emerging global value chains."
By combining a large number of datasets along common dimensions, Empirical Foresights has developed methods to estimate the regional and industry level linkages. Using advances in data analytics techniques, the firm aims to estimate the elasticities and multipliers with respect to a set of socio-economic & market indicators and policy variables. For example, one could find out the impact of 1% drop in oil prices on employment in auto manufacturing sector in India.
Regarding the company's plan for the future, Dr. Gupta adds, "We have the infrastructure and capabilities to expand this analytical framework to the company level. But that data is harder to find for many emerging economies. Our ultimate goal is to have the data-driven models in place that could determine for example the impact of 10% revenue growth in LVMH in France on revenue growth for Google in US."
The data-driven models which try to capture behavioural aspects have one criticism to deal with. The historical data may not always capture the current forces at work. But the firm is working hard to ensure that its models get as close to the reality as possible. There are plans to use indicators like Google Trends, Twitter sentiment analysis and monitoring consumer behaviour, spending patterns as well as rely on trends in more persistent variables like demographics.
It is an ambitious project and Empirical Foresights is actively looking to collaborate with various companies, research institutes and government departments.