Growth Forecasts Using Time Series and Growth Models

33 Pages Posted: 20 Apr 2016

See all articles by Aart Kraay

Aart Kraay

World Bank - Development Research Group (DECRG)

George Monokroussos

Joint Research Centre, Italy

Date Written: November 1999

Abstract

It is difficult to choose the best model for forecasting real per capita GDP for a particular country or group of countries. This study suggests potential gains from combining time series and growth-regression-based approaches to forecasting.

Kraay and Monokroussos consider two alternative methods of forecasting real per capita GDP at various horizons: - Univariate time series models estimated country by country. - Cross-country growth regressions.

They evaluate the out-of-sample forecasting performance of both approaches for a large sample of industrial and developing countries. They find only modest differences between the two approaches. In almost all cases, differences in median (across countries) forecast performance are small relative to the large discrepancies between forecasts and actual outcomes.

Interestingly, the performance of both models is similar to that of forecasts generated by the World Bank's Unified Survey.

The results do not provide a compelling case for one approach over another, but they do indicate that there are potential gains from combining time series and growth-regression-based forecasting approaches.

This paper - a product of Macroeconomics and Growth, Development Research Group - is part of a larger effort in the group to improve the understanding of economic growth. The authors may be contacted at akraay@worldbank.org or gmonokroussos@worldbank.org.

Suggested Citation

Kraay, Aart and Monokroussos, George, Growth Forecasts Using Time Series and Growth Models (November 1999). World Bank Policy Research Working Paper No. 2224. Available at SSRN: https://ssrn.com/abstract=623982

Aart Kraay

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States
202-473-5756 (Phone)
202-522-3518 (Fax)

HOME PAGE: http://econ.worldbank.org/staff/akraay

George Monokroussos (Contact Author)

Joint Research Centre, Italy ( email )

Via E. Fermi 1
I-21020 Ispra (VA)
Italy

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