Forecasting macroeconomic indicators for seven major economies using the ARIMA model
Economic predicting has existed for ages. It was the Great Depression of the 1930s that gave rise to the current levels of formal forecasting analysis. Following the economic crisis, a greater focus was placed on knowing how the economy works and where it is headed. This resulted in the development of a broader range of statistical and analytical approaches.
Keywords: ARIMA, China, Employment, Forecast, France, GDP, Japan, India, Inflation, Russia, UK, US
Economic predicting has existed for ages. It was the Great Depression of the 1930s that gave rise to the current levels of formal forecasting analysis. Following the economic crisis, a greater focus was placed on knowing how the economy works and where it is headed. This resulted in the development of a broader range of statistical and analytical approaches. The current COVID-19 pandemic is projected to put significant strain on the economic performances around the world. There is a need for prediction studies so that the countries can navigate their macroeconomic policies to maintain the current trends of economic performances even after they are hit by the pandemic. This study is an effort to forecast major macroeconomic indicators for seven major economies, namely, the US, UK, China, France, Japan, Russia, and India. We used WDI datasets for the period 1972-2019 and forecasted for the period 2020-2024 using the Automatic ARIMA forecasting technique. The findings show that employment and inflation in the USA will continue to decrease. The other macroeconomic indicators are expected to have positive trends according to the results. The UK GDP is expected to remain steady and the UK inflation will increase and the labor force participation rate will decrease. The inflation rate in China, according to our analysis, will be close to 5% at the end of 2024. Employment is also expected to decrease. The inflation rate in France will remain below 1% from 2020 to 2024. The projected inflation rate in 2024 is 0.451 percent. The inflation rate in Japan will continue to increase till 2021. It will fall in 2022 and will continue falling until it reaches 0.014 in 2024. The labor participation rate in Russia is expected to fall. The Russian currency is expected to depreciate from 68.2 to 105.3. One of the noticeable projected trends in the Russian economy is that the inflation rate is expected to fall from around 4 percent in 2020 to 1.62 percent in 2024. The inflation rate in India will increase from a projected 6.19 percent in 2020 to reach 7.842 percent in 2021 and subsequent years, indicating that the inflation rate will become stable during the period from 2021 to 2024. The Indian currency is expected to become weaker, and the employment rate is expected to decrease. This study used univariate time series analysis without controlling for Covid-19 disruptions, study hopes to contribute to measuring the deviations of post-Covid-19 economic performances from the current projected trends.