ARIMA model building and forecasting on imports and exports of Pakistan

From the day one, mankind has always been interested into the future. As the civilization advanced with growing sophistication in all phases of life, the need to look into the future also grew with it. Today every government, public private organizations, as well as an individual would like to predict and plan for the future. In order to attain a better growth in the economy of a country, modeling and forecasting is the most important tool now a day, this can be done by one of the statistical technique called a Time series analysis. In this paper we tried to build a time series model called ARIMA (Auto Regressive Integrated Moving Average) model with particular reference of Box and Jenkins approach on annually total Imports and Exports of Pakistan from the year 1947 to the year 2013 with useful statistical software R. Validity of the fitted model is tested using standard statistical techniques. The fitted model is then used to forecast some future values of Imports and export of Pakistan. It is found that an ARIMA (2, 2, 2) and ARIMA (1, 2, 2) model looks suitable to forecast the annual Imports and Exports of Pakistan respectively. We also found an increasing trend both in case of Imports and Exports during this study.