Methods And Applications Of The Establishment Of Leading Indicators System For China's Macroeconomics

The development of business cycle study has gone through more than 100years in western developed countries, the thoughts and theories of which havebecome more and more perfected through constantly innovating andimproving. Now it has been an important tool used by market economycountries to facilitate the analysis and forecast of business cycles. In order tomeet requirements of the market-oriented reform in our country, somedomestic experts and scholars began to work in this field from the middle ofthe 1980s, trying to establish a leading indicators system for China'smacroeconomics and to monitor and analyze the economic fluctuations of ourcountry. However, with the improvement of market economy system, the fastdevelopment of productivity, the constant adjustment of economic structureand the changes of statistical methods, the old indicators system does not fitwith the present business conditions.This text is set about under this kind of background. It has studieddomestic and foreign theories and methods of business indicators, and referredto some old leading indicators system of our country. For the main purpose ofmeeting the requirements of macro-economic administration, we haveestablished a set of composite indexes of business cyclical indicators. This texthas improved the research methods, we have selected the time series which aresufficiently widespread and typical and sensitive to business cycles. We haveexamined the seasonality and irregular factor of selected series before seasonaladjustment on them, and examined the leading characteristic of the selectedseries with the reference series. Finally the text has made a discussion on theproblem existing in the establishment and the application of China's leadingindicators system.This text consists of four parts:The first part has introduced the history and status quo of thedevelopment of business cycle research, put emphasis on the role of businesscycle analysis in government regulation, and explained the concepts andmethods used in economic cycle study. The success of Harvard Index Chartgained considerable fame for business cycle analysis. After the 1950s, theappearance of diffusion indexes and composite indexes, the availability oflarge-scale Macro-econometric Models, and the rise of business surveyenriched the methods of business cycle study. Keynesian and the school of thenew classical macroeconomics proposed government to regulate the economy,which brought the opportunity of high-speed development of business cyclestudy. For many years, the researches by economists have provided atheoretical foundation for business cycle analysis. The developments ofcomputer technology and the researches of mathematics models facilitated theapplications of business cycle researches. Finally this part has emphasized theimportance of leading indicators in the whole business indicators system.The second part has introduced the practical calculating methods used inthis text and proved that the Value added of Industry series be reasonable asthe reference series. In the text, our analysis and research work have beenestablished on the growth-rate cycle, we have used K-L information, timedifference correlation analysis and cyclical pattern matching method toappraise the characteristic of the selected series, and used X-12-ARIMAmethod to examine the seasonality and MCD value of the selected series. Inaddition, the peaks and troughs of each individual time series are dated byapplying the Bry-Boschan method, which was developed in the U.S. NationalBureau of Economic Research (NBER), and we have limited the intervalamong leading, coincident and lading indicators in order to differentiate them.In this part, it has used mode of industry cycle and considered the Value addedof Industry series as the reference series, lengthened the time series of Valueadded of Industry with the regression model, and used GDP and gross outputof industry series to examine its reasonability as the reference series.The third part is the main body of positive research. For the main purposeof measuring the amplitude and rate (volume) of economic fluctuations, wehave used the composite indexes of business indicators. (Calculation methodsof U.S.A. Bureau of Economic Analysis, Department of Commerce) Thecomponents of composite indexes are categorized as leading, coincident, orlagging indicators, and the leading and stability characteristic of the indexeshave been analyzed.The coincident composite index has combined six coincident indictorsthat represent widely differing activities of the economy. We have limited theinterval between selected series and reference series within three months withK-L information and time difference correlation analysis method etc, in orderto make the coincident composite index in accord with the industry cycles ofour country.The leading index is used to predict changes in the direction of theeconomy, since it generally precedes the coincident index by a few months. In...