Abstract
The present study focuses on creating a forecasting model in order to predict the behavior of the economic indicator known as Gross Fixed Capital Formation (GFCF) of the Brazilian construction industry, which reflects the amount of investment in the construction industry sector. The data set consists of monthly observations from January 1996 to December 2016, the year of 2016 is used as validation for the forecast model. As strong seasonality was identified in the time series, Seasonal Autoregressive Integrated Moving Average (SARIMA) and Holt Winters' models are applied and compared. After the evaluation of the selected models, the ARIMA (2,1,2) × (0,1,1) 12 is identified as the best forecast model with reasonable deviations. However, the damped multiplicative Holt Winters' model also produces good results, despite its inability in eliminating the autocorrelation in the residuals. Therefore, both models can predict the GFCF with good accuracy, which can be useful for decision-making by investors and business managers.
Highlights
The construction industry sector has strong influence in country's economic policy, mainly due to its complex productive chain, ranging from mining activity to the generation of infrastructure, as highroads, railroads, bridges, harbors, transportation systems, buildings, among others. Bon (1992) points out that due to the process of industrialization and urbanization in developing countries, the economic growth leads to an increase in the participation of the construction industry in the total income produced
DATA The behavior of the time series can be seen in Figure 1, in which the y-axis represents the Gross Fixed Capital Formation (GFCF) of the construction industry sector and the x-axis represents the time in years
From January 2007 onward, the GFCF grows almost exponentially until November 2013. It is a reflection of the economic policy adopted by the Brazilian government as from January 2007, in this month the Government created the Growth Acceleration Program in order to stimulate the economic activity of the construction industry sector
Summary
The construction industry sector has strong influence in country's economic policy, mainly due to its complex productive chain, ranging from mining activity to the generation of infrastructure, as highroads, railroads, bridges, harbors, transportation systems, buildings, among others. Bon (1992) points out that due to the process of industrialization and urbanization in developing countries, the economic growth leads to an increase in the participation of the construction industry in the total income produced. Bon (1992) points out that due to the process of industrialization and urbanization in developing countries, the economic growth leads to an increase in the participation of the construction industry in the total income produced. It reflects the extensive investment in infrastructure during early stages of country's development. The Gross Fixed Capital Formation (GFCF) of the construction industry is an economic indicator that reflects the amount of investment in the sector. Predicting this indicator can be useful in order to provide us a picture of the Brazilian government economic policy for the years, helping with the budget allocation planning of companies and people in general, besides it can supply a general view on the economic stability and growth for the coming years
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