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A SIMPLE US ECONOMY
FORECASTING MODEL
Svitlana Markova
Carla Murteira
Pablo Zarate
IDEA
• Using past values of important macroeconomic variables as inputs, we can
predict the future state of an Economy.
• Difficulties:
• Choosing RightVariables
• Transforming them Appropiately (Non-Stationarity, non-linear Relations)
• Choosing the right model Specification
• Difficult Benchmark due to Economic Incentives
METHOD: VECTOR AUTOREGRESSION
(VAR)
PIPELINE
ChooseVariables Find Data Clean andTransform
Select Appropiate
Specification
Train Model with
PastValues
Predict FutureValues
(10 Q)
DATA
• Source: Federal Reserve (FRED)
• Time Span: 1980-2015 (Training) 2016-2018 (Prediction)
• Time Unit: Year`s Quarter
• Variables: quarterly (averaged) and seasonally adjusted
VARIABLES
• Inflation: Implicit Price Deflator, Index 2012=100
• GDP: Real Gross Domestic Product in Billions of Dollars
• Wages: Mean usual weekly real earnings
• Consumption: Real Personal Consumption Expenditures in Billions of Dollars.
• Investment: Real Gross Private Domestic Investment in Billions of Dollars.
• Interest Rate: Effective Federal Funds Rate in Percent.
• Unemployment: Civilian Unemployment Rate in Percent.
RESULTS
Real GDP Unemploment
Interest rate
Inflation
Investment Wages
Consumption
RESULTS
RESULTS
Time Period P. GDP Actual GDP P. Investment Actual Investment P. Unemployment Actual Unemployment P. Consumption Actual Consumption
Q1 2016 9.778.420 9,771290926 8.039.071 8,020562672 4.915.796 4,9 9.403.743 9,401933481
Q2 2016 9.785.485 9,776930979 8.046.045 8,018029304 4.764.169 4,9 9.410.226 9,410346137
Q3 2016 9.792.638 9,78169866 8.053.049 8,01705657 4.628.676 4,9 9.416.291 9,416891263
Q4 2016 9.798.676 9,786064858 8.056.419 8,036463766 4.513.520 4,7 9.421.543 9,423250136
Q1 2017 9.803.790 9,790488101 8.055.886 8,048349849 4.434.365 4,7 9.426.120 9,427678867
Q2 2017 9.807.993 9,797857556 8.051.660 8,062137444 4.395.442 4,3 9.430.017 9,434751919
Q3 2017 9.811.405 9,804818102 8.044.258 8,083259471 4.396.913 4,3 9.433.294 9,440253438
Q4 2017 9.814.136 9,810481406 8.034.384 8,085189839 4.435.518 4,1 9.435.992 9,449858643
Q1 2018 9.816.288 9,815964936 8.022.712 8,108029653 4.506.563 4,1 9.438.157 9,451154004
Q2 2018 9.817.950 9,825915125 8.009.846 8,10683262 4.604.795 3,9 9.439.831 9,460929426
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US economy forecasting

  • 1. A SIMPLE US ECONOMY FORECASTING MODEL Svitlana Markova Carla Murteira Pablo Zarate
  • 2. IDEA • Using past values of important macroeconomic variables as inputs, we can predict the future state of an Economy. • Difficulties: • Choosing RightVariables • Transforming them Appropiately (Non-Stationarity, non-linear Relations) • Choosing the right model Specification • Difficult Benchmark due to Economic Incentives
  • 4. PIPELINE ChooseVariables Find Data Clean andTransform Select Appropiate Specification Train Model with PastValues Predict FutureValues (10 Q)
  • 5. DATA • Source: Federal Reserve (FRED) • Time Span: 1980-2015 (Training) 2016-2018 (Prediction) • Time Unit: Year`s Quarter • Variables: quarterly (averaged) and seasonally adjusted
  • 6. VARIABLES • Inflation: Implicit Price Deflator, Index 2012=100 • GDP: Real Gross Domestic Product in Billions of Dollars • Wages: Mean usual weekly real earnings • Consumption: Real Personal Consumption Expenditures in Billions of Dollars. • Investment: Real Gross Private Domestic Investment in Billions of Dollars. • Interest Rate: Effective Federal Funds Rate in Percent. • Unemployment: Civilian Unemployment Rate in Percent.
  • 7. RESULTS Real GDP Unemploment Interest rate Inflation Investment Wages Consumption
  • 9. RESULTS Time Period P. GDP Actual GDP P. Investment Actual Investment P. Unemployment Actual Unemployment P. Consumption Actual Consumption Q1 2016 9.778.420 9,771290926 8.039.071 8,020562672 4.915.796 4,9 9.403.743 9,401933481 Q2 2016 9.785.485 9,776930979 8.046.045 8,018029304 4.764.169 4,9 9.410.226 9,410346137 Q3 2016 9.792.638 9,78169866 8.053.049 8,01705657 4.628.676 4,9 9.416.291 9,416891263 Q4 2016 9.798.676 9,786064858 8.056.419 8,036463766 4.513.520 4,7 9.421.543 9,423250136 Q1 2017 9.803.790 9,790488101 8.055.886 8,048349849 4.434.365 4,7 9.426.120 9,427678867 Q2 2017 9.807.993 9,797857556 8.051.660 8,062137444 4.395.442 4,3 9.430.017 9,434751919 Q3 2017 9.811.405 9,804818102 8.044.258 8,083259471 4.396.913 4,3 9.433.294 9,440253438 Q4 2017 9.814.136 9,810481406 8.034.384 8,085189839 4.435.518 4,1 9.435.992 9,449858643 Q1 2018 9.816.288 9,815964936 8.022.712 8,108029653 4.506.563 4,1 9.438.157 9,451154004 Q2 2018 9.817.950 9,825915125 8.009.846 8,10683262 4.604.795 3,9 9.439.831 9,460929426