Short-Term Energy Outlook Model Documentation: Macro Bridge Procedure to Update Regional Macroeconomic Forecasts with National Macroeconomic Forecasts
June 1, 2010
Overview
The Regional Short-Term Energy Model (RSTEM) uses macroeconomic variables such as income, employment, industrial production and consumer prices at both the national and regional1 levels as explanatory variables in the generation of the Short-Term Energy Outlook (STEO). This documentation explains how national macroeconomic forecasts are used to update regional macroeconomic forecasts through the RSTEM Macro Bridge procedure.
Both the national and regional macroeconomic forecasts are generated by models developed by IHS Global Insight Inc. (GI). GI updates its national macroeconomic forecasts monthly using its model of the U.S. economy. EIA re-runs the GI model to produce national-level macroeconomic forecasts that are consistent with the STEO energy price forecasts.
GI also produces forecasts by state and by region on a quarterly basis through its U.S. Regional Service. At the time when the regional model is run, the regional forecasts are consistent with the GI baseline national forecasts. However, since the national forecasts are revised with the STEO price paths, and are also updated monthly, there may be a disconnect between the regional and national macroeconomic forecasts.
The Macro Bridge (MB) procedure is run every month to adjust the regional forecasts so that they reflect economic activity that is consistent with the current national forecasts.