Study Of Using Financial Indicators To Forecast Microeconomic Dynamics In China

To maintain the stability of price level and to ensure sustained economic growth are the best target portfolios for most policy makers.Throughout the economic history,it can be found that the economic development always fluctuates up and down around its equilibrium state,which requires policy makers be capable of predicting the future tendency of macroeconomic dynamics accurately and adopting corresponding discretionary monetary policies and fiscal policies in order to ensure the realization of economic goals.Furthermore,as an integrated embodiment of a country's economic development,the macroeconomic condition influences not only the government's macroeconomic policy,it can also influence the investment decisions of the enterprises and individuals,therefore,forecasting the trend of macroeconomic dynamics has become one of the major topics for current macroeconomic policy makers,economist and researchers.Based on the research of macroeconomic forecasting theories home and abroad,this paper completes the following things: 1)summarizes kinds of macroeconomic forecasting theories and research methods on the basis of the domestic and international scholars.2)analyzes the transmission mechanism from financial system to macro economy in the aspects of both financial stability and stress of financial system.3)summarizes the main methods of measuring the financial stability and stress of financial system,and composes the Financial Soundness Index and Financial Stress Index fitting with the condition of China's financial system.4)uses a Mixed Data Sampling Model to examine the forecasting ability to the macroeconomic growth of the two composing indexes above.This paper has found that both Financial Soundness Index and Financial Stress Index not only have good forecasting ability to Macroeconomic Climate Index at the same frequency,but also have good forecasting ability to the GDP growth rate at different frequency.The Financial Soundness Index is 13 months ahead of Macroeconomic Climate Index and GDP growth rate,while the lags intervals of Financial Stress Index are 4 months,which means the Financial Stress Index can forecast short-term trends of the macroeconomic condition and the Financial Soundness Index can forecast mid-term to long-term trend of the macroeconomic condition.Furthermore,this paper provides several pieces of advice for the policy makers based on the results in the end.