Forecasting China's Economic Growth and Inflation
Although macroeconomic forecasting forms an integral part of the policymaking process, there has been a serious lack of rigorous and systematic research in the evaluation of out-of-sample model-based forecasts of China's real GDP growth and CPI inflation. This paper fills this research gap by providing a replicable forecasting model that beats a host of other competing models when measured by root mean square errors, especially over long-run forecast horizons. The model is shown to be capable of predicting turning points and to be usable for policy analysis under different scenarios. It predicts that China's future GDP growth will be of L-shape rather than U-shape.
We thank Chun Chang, Xiang Deng, and Zhao Li for helpful discussions. We are especially grateful to Yandong Jia at the People's Bank of China, who has generously offered insights into the Chinese data and the practice of China's monetary policy. This research is supported in part by the National Natural Science Foundation of China Research Grants 71473168 and 71473169. The views expressed herein are those of the authors and do not necessarily reflect the views of the Federal Reserve Bank of Atlanta, the Federal Reserve System, or the National Bureau of Economic Research. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Patrick Higgins & Tao Zha & Wenna Zhong, 2016. "Forecasting China's economic growth and inflation," China Economic Review, . citation courtesy of