ECONOMIC FORECASTING AT BANK OF GREEN - Case Study Example

ECONOMIC FORECASTING AT Bank OF GREEN Using 1990 as the base year, the economic performance of the U.S (the GDP) can be forecasted for the subsequent years. With the 1990’s GDP being 5,716.4 and the 2000 dollar based GDP for the same years being 7112.1, it is possible to establish a GDP focus equation that would be useful in determining the GDP performance for coming years. Using this equation: GDP= 5716 + 348.925t (where t – quarterly time bound), we can conclude that the GDP is expected to increase by $348.

925 each quarters. Although the economy is expected to grow at this pace, this is not guaranteed give the economic shocks and uncertainties that surround the economy. Quarters Predicted GDP Residual ValueActual Output2006 Q111,394.71,642.713,037.42006 Q210,786.21,764.012,550.22006 Q310,333.51,914.312,247.82006 Q410,125.31,927.812,053.1In 2006, the GDP surpassed the predicted values for all the quarters, an indication of strong economic performance beyond the expected standards during the years.

Although the economic performed stronger that anticipated by experts in 2006, there were reasons for concern among investors. From the onset, the GDP indicators for the first quarter of 2006 financial year showed a strong upward performance with the actual GDP being $13,037.4. However, during the second quarter of the years, the economic performance dropped to $12,550.2. The drop in the GDP was attributed to the rise in inflation and unemployment. The GDP further dropped in the third and fourth quarter of the year.

This fast declining GDP performance of the U.S raised panic among investors, prompting withdrawal by some potential investors because the economy was becoming more unpredictable, hence questioning the its profitability potential. ReferenceOECD Economic Outlook, Volume 2006 Issue 2. (2006). S.l.: OECD Pub.