Modeling GDP with a continuous-time finance approach

Zhenya Liu, Rongyu You and Yaosong Zhan
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Zhenya Liu: Métis Lab EM Normandie - EM Normandie - École de Management de Normandie = EM Normandie Business School
Rongyu You: Renmin University of China = Université Renmin de Chine
Yaosong Zhan: NSYSU - National Sun Yat-sen University

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Abstract: We apply a continuous-time finance approach to model the GDP trajectories of the world's two largest economies, the United States and China. Using stochastic process models and first-passage time theory, we forecast when China's GDP will surpass that of the United States. To account for changing economic conditions, we incorporate a change-point detection method, which segments the data into periods of stable economic growth. Our results demonstrate that by considering change points, our predictions become more robust and provide valuable insights into the future economic outlook for both countries.

Keywords: GDP; Stochastic process; First passage time; China and United States (search for similar items in EconPapers)
Date: 2025-04
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Published in Finance Research Letters, 2025, 76, pp.106971. ⟨10.1016/j.frl.2025.106971⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04992105

DOI: 10.1016/j.frl.2025.106971

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