Year: 2016
Type: report
Abstract: 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. We find that M2 supply, rather than interest rates, is a key variable for forecasting macroeconomic variables. Annual GDP growth for the next five years is predicted to be close to the 6.5% official target and a future GDP growth path is predicted to be of L-shape rather than U-shape.
DOI: 10.3386/w22402
Authors: Patrick Higgins, Tao Zha, Karen Zhong
Language: English
Domain: Social Sciences
Open Access status: green
Awards: G1206649750, G5926346996
OpenAlex ID: W3022493630