A Dynamic Factor Model for Current-Quarter Estimates of Economic Activity in Hong Kong
AbstractThis paper applies the single-index dynamic factor model developed by Stock and Watson (1991) to construct current-quarter estimates of economic activity in Hong Kong. The Hang Seng index, a residential property price index, retail sales and total exports are used as coincident indicators. Principal Component Analysis is first used to obtain an impression of the common component of the indicator series. This component and the dynamic factor identified by the Stock-Watson methodology are strongly correlated and seem to account for economic fluctuations in Hong Kong reasonably well.
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Bibliographic InfoPaper provided by Hong Kong Institute for Monetary Research in its series Working Papers with number 162004.
Length: 21 pages
Date of creation: Aug 2004
Date of revision:
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More information through EDIRC
Business cycles; dynamic factor model; Kalman filtering;
Find related papers by JEL classification:
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
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