Copyright, American Society for Engineering Management, 2020.Knowledge of the historical and changing state of a countries economic performance as well as internal performance of a company¿s key performance metrics are critical to iterative development of strategy development and deployment. This article offers an improvement in methods for monitoring external and internal performance of key performance measures. We specifically address external monitoring related to the economy, however the framework can be applied to other external or internal measures. Research in macroeconomics describes economic performance as a function of key economic health indicators (KEHIs) such as output, unemployment, and inflation with the goal of understanding the underlying drivers of KEHIs in order to help governments, businesses and people make informed decisions regarding strategy development and deployment. The understanding of economic performance through the KEHIs can be broken into the following components: describing historical performance (including current status) and forecasting future values. Models used to: describe and forecast KEHIs can be partitioned into parametric and nonparametric which differ by how they represent reality. Parametric models start with theoretical relationships and let data influence the model parameters. Nonparametric models let the data, from individual or multiple economic series, influence the model selection. The state-of-the-art parametric macro-economic models did not forecast the 2008 recession. This paper suggests a 2-level analytical framework, based on a proposal by Blanchard, that develops a historical understanding of the data as a foundation and builds knowledge with nonparametric models of increasing complexity that can inform parametric modeling efforts, improving the reliability of external and internal monitoring.
