Construction and Application of Chinese Mixed Frequency Asymmetric Financial Prosperity Index——Based on an Empirical Analysis of MF-MS-DFM Model

Abstract

Abstract:

To make full use of the information of mixed frequency data, this paper constructsa Mixed Frequency Markov Switching Dynamics Factors Model (MF-MS-DFM) that can comprehensively use daily and monthly data and chooses mixed frequency data of four daily and six monthly financial variables to construct an empirical model for estimation. Then we work out China's Mixed Frequency Asymmetric Financial Prosperity Index (MFMS-FPI) and make a comparative analysis and correlation analysis between MFMS-FPI and macroeconomic variables. The studies imply that MFMS-FPI effectively identifies the changes of China's real time financial cycle and the monetary policy cycle with time lag, and MFMS-FPI is the leading and predictive index of macroeconomic variables. Therefore, we advise the relevant government organizations to construct MFMS-FPI to monitor the changes of China's financial cycle on a real time basis.

Key words: financial prosperity index, mixed frequency data, MF-MS-DFM model, CPI, GDP

Zhou Decai, Zhu Zhiliang, Ji Yingxin, Yu Yonglei. Construction and Application of Chinese Mixed Frequency Asymmetric Financial Prosperity Index——Based on an Empirical Analysis of MF-MS-DFM Model[J]. , 2019, 31(8): 71-83.

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