Taking the temperature: forecasting GDP growth for mainland China, Issue 6

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Bank of Finland, Bofit--Institute for Economies in Transition, 2006 - Business & Economics - 40 pages
We present a new composite leading indicator of economic activity in mainland China, es-timated using a dynamic factor model. Our leading indicator is constructed from three se-ries: exports, a real estate climate index, and the Shanghai Stock Exchange index. These series are found to share a common, unobservable element from which our indicator can be identified. This indicator is then incorporated into out-of-sample one-step-ahead forecasts of Chinese GDP growth. Recursive out-of-sample accuracy tests indicate that the small-scale factor model approach leads to a successful representation of the sample data and provides an appropriate tool for forecasting Chinese business conditions.

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Contents

Contents
5
A leading indicator for Chinese growth rates
18
Conclusions
33

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