An adaptive approach to forecasting three key macroeconomic variables for transitional China
Linlin Niu (),
Xiu Xu and
No 12/2015, BOFIT Discussion Papers from Bank of Finland, Institute for Economies in Transition
We propose the use of a local autoregressive (LAR) model for adaptive estimation and forecasting of three of China’s key macroeconomic variables: GDP growth, inflation and the 7-day interbank lending rate. The approach takes into account possible structural changes in the data-generating process to select a local homogeneous interval for model estimation, and is particularly well-suited to a transition economy experiencing ongoing shifts in policy and structural adjustment. Our results indicate that the proposed method outperforms alternative models and forecast methods, especially for forecast horizons of 3 to 12 months. Our 1-quarter ahead adaptive forecasts even match the performance of the well-known CMRC Langrun survey forecast. The selected homogeneous intervals indicate gradual changes in growth of industrial production driven by constant evolution of the real economy in China, as well as abrupt changes in interestrate and inflation dynamics that capture monetary policy shifts.
JEL-codes: E43 E47 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cna, nep-for and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Journal Article: An adaptive approach to forecasting three key macroeconomic variables for transitional China (2017)
Working Paper: An Adaptive Approach to Forecasting Three Key Macroeconomic Variables for Transitional China (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bof:bofitp:2015_012
Access Statistics for this paper
More papers in BOFIT Discussion Papers from Bank of Finland, Institute for Economies in Transition Bank of Finland, BOFIT, P.O. Box 160, FI-00101 Helsinki, Finland. Contact information at EDIRC.
Bibliographic data for series maintained by Minna Nyman ().