Expected U.S. GDP Growth Rate Going Forward

Introduction

            There have been many speculations on the issue of the growth rate of the Gross Domestic Product of America in the recent years. Two main models have been suggested to represent the Gross Domestic Product growth rate of the country i.e. stochastic and deterministic. Nelson and Plosser (1982) were the first to suggest the stochastic model which was a deviation from the traditional deterministic approach. The two suggested that the environmental shocks were of greater consequence than had been previously thought.

            Ben-David and Papell (1995) disputed with this when they suggested that deterministic models were more accurate as opposed to the stochastic model. This was informed by tests they did using longer time series which gave them enough ground to make good their claim that permanent. Whether the model used is the stochastic or the deterministic, or whether the real shocks are small or large, they are of importance in the determining of the economy growth.

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