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| The Mixed Frequency Measuring of Chinese FCI and Its Risk Warning Behavior |
| SHANG Yuhuang, ZHENG Tingguo
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Southwestern University of Finance and Economics;
Xiamen University |
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Abstract Financial Condition Index provides the empirical evidence for the perspective monetary policy and financial risk warning. Based on the quarterly GDP and other monthly observations, this paper constructs the mixed frequency FCI model to measure the Chinese FCI and investigate its kisk warning function. We find that: first, the mixed frequency models have the better results than that of same frequency model. Real estate price and GDP are major driving factors of FCI. Second, the FCI is pro-cyclical. It has more closely relation with economic climate leading index. However, the correlation between FCI and consistent index is stronger in recession period. Third, the FCI is the leading factor of consistent index according to Granger causality. It shows warning function to the fluctuation of future macro fundamental. Moreover, The FCI can also improve the forecast accuracy of economic climate index. Fourth, when using the proxy variables of stock market and monetary policy, we also obtain the similar measure results. It means the robustness of the above findings.
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Received: 21 September 2017
Published: 29 October 2018
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