The purpose of this seminar paper is to determine Israel’s current economic situation, the economic outlook for the next two years and the mains risks the country is exposed to.
In this paper we evaluate Israel’s current real Gross Domestic Products (GDP) growth rate, current and lagging indicators influencing the GDP growth rate and different forecast models with input sample real GDP data. Finally the model with the best performance to forecast Israel’s real GDP growth will be applied, providing a forecast for the next two fiscal years.
Table of Contents
1 Introduction
2 Israels Real GDP
2.1 Data
2.2 Business Cycle
2.3 Leading or lagging Indicators
3 Forecast assumptions
3.1 Oil Price
3.2 Exchange Rate
3.3 Business cycle US
4 Business Cycle forecast
4.1 Introduction
4.2 Our approach
4.3 Methodology
4.4 Evaluation Results
4.5 Final Forecast
4.6 Forecast Values and forecast Comparison
4.7 Conclusion:
5 Risk analyisis
Objectives and Research Focus
The primary objective of this seminar paper is to analyze Israel's current economic situation, provide an outlook for the upcoming two-year period, and identify the principal risks to which the national economy is exposed.
- Evaluation of Israel's real GDP growth rate and its historical trajectory.
- Identification of current and lagging economic indicators influencing GDP performance.
- Application and comparison of various autoregressive forecast models.
- Assessment of external economic parameters and their impact on future growth.
- Systematic risk analysis including economic, political, and financial system factors.
Auszug aus dem Buch
2.2 Business Cycle
Now to determine the Business Cycle that the economy is currently situated, we must determine the output gap, as the business cycle is given by the deviation of the real GDP from the potential GDP.
The output gap is given by the formula: Y (Gap) = Y (Real) – Y (Potential) [abs.]
Or as percentage of the Potential GDP: y (gap) = (Y (Real) / Y (Potential) -1) x 100 [%]
To identify Y (Potential) we are approaching the Hodrick-Prescott-Filter (HP-Filter) to get the trend, which can be considered as the Y (potential). The HP values are calculated by Excel HP Filter Add in, where the smoothing parameter Lambda [λ] is 1600 by default.
Summary of Chapters
1 Introduction: Provides an overview of Israel's economic development, its transformation into a high-tech economy, and its integration into the global market.
2 Israels Real GDP: Evaluates the historical GDP data, determines the business cycle using the HP-filtering method, and analyzes the correlation of various economic indicators.
3 Forecast assumptions: Examines external parameters such as oil prices, exchange rates, and the U.S. business cycle as foundations for future economic projections.
4 Business Cycle forecast: Details the methodology for forecasting, compares different autoregressive models (AR), and presents the final growth projections for Israel.
5 Risk analyisis: Assesses the country's risk profile, focusing on economic, political, and financial system stability.
Keywords
Israel, GDP, Economic Forecast, Business Cycle, HP-Filter, Autoregressive Model, Real GDP, Market Study, Economic Indicators, Risk Analysis, Inflation, Trade Balance, High-tech Economy, Monetary Policy, Financial Stability
Frequently Asked Questions
What is the primary objective of this study?
The paper aims to evaluate the current economic situation in Israel, forecast its real GDP growth for the next two years, and assess the key risks facing the country.
Which economic indicators are identified as relevant for Israel?
The study examines several indicators including private consumption, industrial production, unemployment rate, inflation (CPI), production price index (PPI), exports, and imports.
What methodology is used to forecast GDP growth?
The research employs a time series approach, specifically utilizing autoregressive models (AR(1) and AR(3)) based on quarterly data from 1995 to 2015.
How is the business cycle determined in this paper?
The business cycle is determined by calculating the output gap, which represents the deviation of real GDP from potential GDP, using the Hodrick-Prescott (HP) filter.
What are the main findings regarding Israel's economic risks?
Israel is classified as a CRT-3 country, with risks primarily centered on regional stability, defense spending pressures, and structural issues like income inequality, despite a strong high-tech sector.
How do the AR(1) and AR(3) models perform?
The AR(3) model is considered the superior choice as it provides more realistic projections compared to the very flat values generated by the AR(1) model.
What role does the U.S. economy play in these projections?
The study considers the U.S. business cycle as an exogenous parameter, as U.S. economic conditions significantly influence global trends and, consequently, the external-oriented sectors of the Israeli economy.
What is the impact of the high-tech sector on the Israeli economy?
The high-tech sector serves as a primary engine for economic growth and contributes significantly to the country's competitive advantage in international markets.
- Arbeit zitieren
- Kristal Robles (Autor:in), 2016, Market Study Israel. Forecasting Israel´s GDP Growth, München, GRIN Verlag, https://www.grin.com/document/371826
