Edited by Lawrence R. Klein
Appendix: Preliminary Analysis of Brazil
Andrei Rudoi The attractive acronym, BRIC, referring to a group of promising expansionary economies, is being widely used in international discussions. For this volume we present full chapters on Russia, India and China, but an entire chapter is not devoted to the Brazilian case. Brazil, however, has been studied by the main techniques presented in this volume by Dr Andrei Rudoi, and he has provided a brief analysis of Brazilian GDP and inflation. To assure the reader that we have full capabilities for dealing with estimates for Brazil, similar to those for the other diverse country studies, Dr Andrei Rudoi prepared, using principal components analysis, materials for forecasting GDP and CPI values to demonstrate that the BRIC countries can all be analyzed by our methods. Dr Rudoi has used 30 indicator values and computed a forecast equation for the GDP of Brazil. This is a quarterly treatment, covering 1993Q1 to 2005Q4. The case of inflation is measured by monthly movements of the CPI from June 1995 through May 2006. For treatment of seasonal variation he has introduced two ‘dummy’ variables for GDP movements and four ‘dummy’ variables for CPI. As many as 60 indicator values are used. The Brazilian equations and out-of-sample extrapolations to test forecasting capabilities are given below. GDP 5 89.00 1 2.00D2 1 1.10 D3 1 0.28 GDP(23) 1 2.14PC1 (13.02) (4.06) (2.27) (4.92) (13.75) 2 1.32PC2 2 2.01PC3 1 0.18PC4 1 1.31PC8 1 0.92PC10 (4.41) (6.01) (1.07) (3.78) (2.12) 1 0.77PC2(22) 2 0.81PC3(23)...
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