A grey system model for simulation of economic development

Economic development is a continuous and dynamic process. It can be divided into three specific components according to different time scales: the long-term trend, the medium-term periodic variation and the short-term random fluctuation. In this paper we used the grey system model to simulate the long-term trend of economic development and obtained the periodic variation from analysis of residual model. Amalgamating the long-term trend and the periodic variation, we obtained periodic correction, from which we got the random fluctuation. Using the periodic variation and the random fluctuation, the whole economic development process has been simulated through developing a predictive model. The application of the model to Shanxi Province shows that the model performs well. This model provides a new analysis method for the development planning of regional economy,which can provide the main scientific basis for the adjustment of economic structure and the economic development of Shanxi Province in the future.