Forecasting Relative Price Movements for Project Evaluation

Abstract

Inflationary impacts have differentially influenced the prices of various components of water resources projects. Therefore forecasts based on statistical analyses of historical price trends are examined to determine whether the differential inflationary impacts in the future may be predicted. Simple statistical estimates of anticipated rates of change in relative prices are shown not to be reliable predictors of future price movements. Relative price movements may therefore only be forecast on the basis of fairly substantial analyses of market forces.