Do sentiment indicators help to assess and predict actual developments of the Chinese economy?

Aaron Mehrotra and Jouko Rautava

Journal of Chinese Economic and Business Studies, 2008, vol. 6, issue 3, 225-239

Abstract: This paper evaluates the usefulness of business sentiment indicators for forecasting developments in the Chinese real economy. We use data on diffusion indices collected by the People's Bank of China for forecasting industrial production, retail sales and exports. Our bivariate vector autoregressive models, each composed of one diffusion index and one real sector variable, generally outperform univariate autoregressive models in forecasting one to four quarters ahead. Similarly, principal components analysis, combining information from various diffusion indices, leads to enhanced forecasting performance. Our results indicate that Chinese business sentiment indicators convey useful information about current and future developments in the real economy. Moreover, the results could be seen as support for the reliability of the official data on the real economy, as both survey and real sector data seem to reflect the same underlying economic dynamics. … But historically, we always observed in the past that the hard data followed suit soft data. There was a strong correlation. (Jean-Claude Trichet, President of the European Central Bank)1

Keywords: forecasting; diffusion index; VAR; China (search for similar items in EconPapers)
Date: 2008
References: View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.tandfonline.com/doi/abs/10.1080/14765280802283451 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Do sentiment indicators help to assess and predict actual developments of the Chinese economy? (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:jocebs:v:6:y:2008:i:3:p:225-239

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RCEA20

DOI: 10.1080/14765280802283451

Access Statistics for this article

Journal of Chinese Economic and Business Studies is currently edited by Professor Xiaming Liu

More articles in Journal of Chinese Economic and Business Studies from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().