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.
GDP Trend of US
The Gross Domestic Product of the US has had a consistent growth rate of about 3.31 percent from the year 1947 up to 2010. This is despite the fluctuating environment that the country has faced including the most recent global economic crisis of 2009. The most impressive Gross Domestic Product recorded during this period was the march 1950 all time high of 17.20%. The lowest ever realized Gross Domestic Product during this same period of time was the March 1958 all time low record of -10.40 Gross Domestic Product.
One of the reasons why the Gross Domestic Product of America has averagely remained stable is the fact that the country’s economy can be described as market oriented. In such an economy, private firms and individuals make have an autonomous role in decision making. In addition, federal government makes its purchases primarily from the private firms.
There are a couple of economic indicators that are important in the forecasting of the Gross Domestic Product. These include the inflation percentage, the London gold percentage, the unemployment percentage, the prime percentage as well as the Gross Domestic Product growth percentage. Effects of such things like wars should be put into consideration when forecasting of the Gross Domestic Product (Dickey & Fuller, 1979). This assertion is informed by the fact that the economy was below trend in the season just after the Second World War and picked up again after the effects of the war had been shed off. The recession also caused the Gross Domestic Product growth to fall considerably during the early nineties and continued having a sluggish trend until 1997 when it finally picked up again.
As seen in the GDP growth rate graph above, America suffered a major decline in the 2009 financial year. Many businesses shut down and the dollar weakened even further. however, it is worth noting that the following year, (2010), the economy improved again and it is expected that just like was the case in 1974 and 1990, the economy of the country will weather the storm and the average GDP growth will continue to gain in positive territory.