Do sentiment indicators help to assess and predict actual developments of the Chinese economy?
AbstractThis 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 AR 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. They also suggest that the official data provide a fairly accurate picture of the Chinese economy.
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Bibliographic InfoPaper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 11/2007.
Length: 27 pages
Date of creation: 04 May 2007
Date of revision:
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forecasting; diffusion index; VAR; China;
Other versions of this item:
- Aaron Mehrotra & Jouko Rautava, 2008. "Do sentiment indicators help to assess and predict actual developments of the Chinese economy?," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 6(3), pages 225-239.
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
- P27 - Economic Systems - - Socialist Systems and Transition Economies - - - Performance and Prospects
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-05-12 (All new papers)
- NEP-CNA-2007-05-12 (China)
- NEP-DEV-2007-05-12 (Development)
- NEP-FOR-2007-05-12 (Forecasting)
- NEP-MAC-2007-05-12 (Macroeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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