Forecasting GDP Growth: Application of Autoregressive Integrated Moving Average Model

Abstract

This paper uses Box-Jenkins approach to model and forecast real GDP growth in Ethiopia. Such an approach could easily provide forecast for key macroeconomic variables in limited data environment. Based on the approach, the paper estimates Autoregressive Integrated Moving Average ARIMA (1,1,1) model and forecasts real GDP growth. Both the in-sample fit and pseudo-out of sample forecasts show that the ARIMA model’s performance are good and better than other forecasts.