Taking the temperature: forecasting GDP growth for mainland in China

Declan Curran and Michael Funke

No 6/2006, BOFIT Discussion Papers from Bank of Finland Institute for Emerging Economies (BOFIT)

Abstract: We present a new composite leading indicator of economic activity in mainland China, estimated using a dynamic factor model.Our leading indicator is constructed from three series: 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 smallscale factor model approach leads to a successful representation of the sample data and provides an appropriate tool for forecasting Chinese business conditions.

Keywords: Forecasting; China; Leading Indicator; Factor Model; Growth Cycles (search for similar items in EconPapers)
JEL-codes: C32 C52 E32 E37 (search for similar items in EconPapers)
Date: 2006
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Related works:
Working Paper: Taking the Temperature - Forecasting GDP Growth for Mainland China (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bofitp:bdp2006_006

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