Author(s)

Hengrui Zhang ¹

Affiliation(s)

¹ University of International Business and Economics, Insurance Academy, Chaoyang District, Beijing, 100029, China

Corresponding Author

Hengrui Zhang

ABSTRACT

The financial condition index combines the information of multiple financial variables, which can reflect the overall operation of the financial market more comprehensively and intuitively than a single index.The TVP-FAVAR model based on dynamic weight measures the real-time FCI in China, overcomes the single defect of fixed selection index and coefficient, allows parameters and predictive variables to have time-variation, can adapt to the sudden change of economic structure, so that FCI has the function of financial market liquidity indicator.Empirical research shows that based on the dynamic weight of TVP-FAVAR model construction of financial condition index on the one hand can better reflect the actual financial market tightness, on the other hand can for the future macroeconomic indicators, especially the inflation rate is more accurate prediction, to provide important reference for the formulation and implementation of monetary policy in China.

KEYWORDS

FCI, TVP-FAVAR, dynamic weight, financial market

CITE THIS PAPER

Hengrui Zhang, The Structure and Comparative Study of the Dynamic Financial Condition Index. Accounting, Auditing and Finance (2022) Vol. 3: 9-16. DOI: http://dx.doi.org/10.23977/accaf.2022.030103.

REFERENCES

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