A Real Activity Index for Mainland China
AbstractThis paper develops a composite real activity index (RAI) using eight monthly activity indicators for the Mainland economy based on the methodology of the Conference Board. The RAI appears to be able to track the Mainland GDP growth quite well. The results from a logit regression indicate that the RAI can correctly predict the next movement of the quarterly GDP growth rate with a probability of up to 68 percent. In addition, the RAI can beat a random walk process when used to conduct forecasts. Compared with indexes constructed using alternative methods, the RAI has economic properties that are easier to interpret. While the predictability of the RAI can be enhanced further with better data, it is a useful leading indicator to help monitor the momentum of the aggregate activities of the Mainland economy before the official release of the quarterly GDP data.
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Bibliographic InfoPaper provided by Hong Kong Monetary Authority in its series Working Papers with number 0707.
Length: 19 pages
Date of creation: May 2007
Date of revision:
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Real Activity Index; China; Dynamic Factor Model;
Find related papers by JEL classification:
- C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
- C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
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