Demand Forecasting Errors

Demand forecasts form a key input to the
economic appraisal. As such any errors present within the
demand forecasts will undermine the reliability of the
economic appraisal. The minimization of demand forecasting
errors is therefore important in the delivery of a robust
appraisal. This issue is addressed in this note by
introducing the key issues, and error types present within
demand forecasts (Section 1). Following that introductory
section the error types are described in more detail:
measurement error (Section 2), model specification error
(Section 3) and External or Exogenous Errors (Section 4).
The final section presents a discussion on how to manage
demand forecasting errors (Section 5).