Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/212749
Authors: 
Qin, Duo
He, Xinhua
Year of Publication: 
2012
Series/Report no.: 
BOFIT Discussion Papers 25/2012
Abstract: 
Ways of extracting financial condition indices (FCI) are explored and alternative FCIs external to the Chinese economy are constructed to model their predictive content. The exploration aims at highlighting the rich and varied dynamic features of financial variables underlying FCIs and the importance of synchronising dynamic information between FCIs and the real-sector variables to be forecasted. The modelling experiment aims at improving the forecasting model upon which the FCIs are assessed. Four variables are chosen as the likely macro channel of the FCIs affecting the Chinese economy. It is found that the FCI-led models enjoy forecasting advantages over a benchmark model in three out of the four variables, although the benchmark model is not dominated by the FCI-led models when judged by in-sample encompassing tests. The evidence indicates the increasing exposure of the Chinese economy to the global financial conditions.
Subjects: 
financial index
dynamic factor
VAR
error correction
encompassing
JEL: 
E17
F37
G17
C43
Persistent Identifier of the first edition: 
ISBN: 
978-952-462-756-6
Document Type: 
Working Paper

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