GDP forecasting using box-jenkins methodology

Abstract

The objective of this paper is to use time series analysis techniques to model the stochastic mechanism that gives rise to the GDP series, and to predict or forecast future values of the series based on the history of the series. Since GDP {nominal GDP) is the output of currently produced goods and services evaluated at current market prices, this value will change when the overall price level changes, as well as when the actual volume of production changes. In order to construct a measure of output that varies only with the quantities of goods produced and not with the price levels, what is known as real GDP, we need to measure output in terms of constant prices or constant-valued dollars from a base year. Thus, for the analysis in this project all the values of GDP will be in billions of 1987 dollars.