The Comparison of GDP Strategies Forecasting in Romania

Abstract

The aggregates, like GDP, can be forecasted using two different strategies, the criterion of predictions’ accuracy being used to select the best strategy. The aim of this paper is to find out what is the best strategy to be used in predicting GDP in Romania. In this study, for data series of GDP and its components for the Romanian economy in 1996-2011, we have come to the conclusion that the direct forecasting strategy is the most suitable one in making one-step-ahead predictions. Another possible strategy is based on the aggregation of GDP components using constant or variable weights, but in the case of Romania it is not recommended. The one-step-ahead forecasts are better than those on a horizon of 3 years. The selection of the best forecast has an important contribution in reducing the degree of uncertainty in forecasting.