Gross Domestic Product (GDP) is an important measure of total production and is used by business to help guide their planning for the future. Table 14.4.8 shows a BoxJenkins analysis of the percentage change in GDP (from the same quarter of the previous year, as a measure of the growth rate of the overall economy), while Fig. 14.4.1 shows the data series with the Box-Jenkins forecasts.20 

a. What kind of process has been estimated? 

b. Which estimated coefficients (if any) are significant? 

c. Based on the figure, would you be surprised if GDP fell by 5 percentage points (as compared to the same quarter in the previous year) in the year 2018? 

d. Based on the figure, would you be surprised if GDP grew by 4 percentage points (as compared to the same quarter in the previous year) in the year 2019? 

e. The forecasts in the figure appear to level off after about 2018. Does this tell you that the GDP growth rate will stop changing from year to year in the future? Explain. 

Fig. 14.4.1

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TABLE 14.4.8 Results of a Box-Jenkins Analysis of GDP Percent Change Final Estimates of Parameters St Dev Type Estimate t Ratio 14.3235 AR 1 0.8336 0.05820 MA 1 -0.3893 0.1001 -3.8898 4.2730 Constant 2.4669 0.5773 No. of Obs.: 102. Residuals: SS Adjusted=54.3027; DF=99. Standard Error =0.7337. my -4 -6 1990 1995 2000 2005 2010 2015 2020 Year GDP percent change 2.