Explain the reasons behind using of Economic Indicators in building a GDP forecasting model

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Explain the reasons behind using of Economic Indicators in building a GDP forecasting model

Prepare a 30 minutes presentation supported by 15-20 Microsoft® PowerPoint® slides in which you summarize your economic forecast model.

Explain the reasons behind using of Economic Indicators in building a GDP forecasting model (consider reading the Klein & Moore’s paper and the BCI Handbook on economic indicators. This paper is available in the Course Materials Newsgroup. In you presentation you must define the following terms: economic indicators (explain the difference between, leading, lagging and coincident), economic forecasting, and economic modeling. Explain the difference between GDP and Real GDP. Conclude the presentation offering a suggested theoretical model for forecasting real GDP using at least six leading indicators. Examples of Economic Indicators include:

ü  Interest rate (for example: mortgage rate, prime rate, fed funds rate, discount rate, treasury bill or bond yield)

ü  Stock Index ( for example: S&P 500, DJIA, or NASDAQ)

ü  Capacity utilization

ü  Housing starts and Permits

ü  Sales of New Single-Family Homes

ü  Advance Durable Goods Orders

ü  Auto Sales

ü  Consumer Sentiment

ü  Foreign exchange rate

ü  Merchandize Trade Balance

ü  Unemployment

ü  Personal income

ü  Federal Budget (spending or deficit)

ü  Retail sales

ü  Money supply (measured by M1, M2, or M3)

ü  Price of oil/gasoline

ü  Inflation (Producer Price Index or Consumer Price Index)

Build an actual forecast model using the six economic indicators, of your choice, as presented on your paper and approved by the instructor. You must define each indicator; explain its relationship to GDP, find its recent history and look up a 12 month projection.

ü  Forecast real GDP for the next 12 month and explain who you arrived at that conclusion

Compare your forecast with any official government GDP forecast