Taking the temperature: forecasting GDP growth for mainland China, Issue 6
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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annual GDP data Bank of Finland BOFIT Discussion Papers Chinese growth cycle Chinese quarterly real Clark and McCracken composite leading indicator constant prices cumulative form Curran and Michael Declan Curran Diebold and Mariano Durbin-Watson statistic economy and economic Editor-in-Chief of BOFIT ENC-t Encompassing tests equal forecasting accuracy estate climate index exports Forecast sample forecasting GDP growth forecasting performance GDP estimates GDP figure GDP growth rate GDP growth series GDP series growth for mainland growth rate cycles growth rate series indicator series Kalman filter mainland China McCracken 2001 mean squared error Michael Funke national accounts nomic p-value post-revision quarter quarterly GDP quarterly real GDP quarterly y-o-y real real estate climate real GDP data real GDP growth real GDP index RECI reference series renminbi revised quarterly real revised real GDP sample period services sector Shanghai Stock Exchange simplex algorithm SSE composite Stock and Watson unobserved value added y-o-y real GDP