Modeling GDP with a continuous-time finance approach

Zhenya Liu, Rongyu You and Yaosong Zhan

Finance Research Letters, 2025, vol. 76, issue C

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)
JEL-codes: C53 E17 F02 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:76:y:2025:i:c:s1544612325002351

DOI: 10.1016/j.frl.2025.106971

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