Forecasting Kenya’s GDP using a hybrid neural network and ARIMA model

Abstract

Background: Gross Domestic Product (GDP) is the market value of goods and services produced within a selected geographical area usually a coun- try in a selected interval in time often a year and can be measured and forecasted in di erent ways for use by governments and other market par- ticipants.Speci c users of information on GDP analysis include the United Nations0 Sustainable Development Goal assessment whose key indicator is economic growth as measured by GDP and the joint International Mon- etary Fund-World Bank methodology for conducting standardized debt- sustainability analyses in low-income countries. Objective:The main objective of this study was to assess the superiority as suggested by Literature of a Hybrid Autoregressive Integrated Moving Average(ARIMA) and feed forward Arti cial Neural Network (ANN) model over a pure ARIMA model in forecasting Kenya0s GDP. Methods: The ARIMA and the additive ANN-ARIMA Hybrid model is used to forecast absolute GDP values and the comparative forecast accuracy is tested using the RMSE and visualization plots.The Box-Jenkins method- ology is used to t the ARIMA model while the feed-forward Neural Network Autoregressive(NNAR) structure is used to model the neural network por- tion of the hybrid model .