Stock-Flow Dynamic Projection

Xi Hao Li () and Mauro Gallegati

MPRA Paper from University Library of Munich, Germany

Abstract: Borrowing from our experience in agent-based computational economic research from `bottom-up', this paper considers economic system as multi-level dynamical system that micro-level agents' interaction leads to structural transition in meso-level, which results in macro-level market dynamics with endogenous fluctuation or even market crashes. By the concept of transition matrix, we develop technique to quantify meso-level structural change induced by micro-level interaction. Then we apply this quantification to propose the method of dynamic projection that delivers out-of-sample forecast of macro-level economic variable from micro-level big data. We testify this method with a data set of financial statements for 4599 firms listed in Tokyo Stock Exchange for the year of 1980 to 2012. The Diebold-Mariano test indicates that the dynamic projection has significantly higher accuracy for one-period-ahead out-of-sample forecast than the benchmark of ARIMA models.

Keywords: economic forecasting; dynamic projection; multi-level dynamical system; transition matrix (search for similar items in EconPapers)
JEL-codes: C53 C63 E27 (search for similar items in EconPapers)
Date: 2015-01-01
New Economics Papers: this item is included in nep-for and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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