Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/119431
Authors: 
Niu, Linlin
Xu, Xiu
Chen, Ying
Year of Publication: 
2015
Series/Report no.: 
SFB 649 Discussion Paper 2015-023
Abstract: 
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.
Subjects: 
Chinese economy
local parametric models
forecasting
JEL: 
E43
E47
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.