Abstract
Abstract. This paper applies the single-index dynamic factor model developed by J. H. Stock and M. W. Watson to construct (almost) real-time estimates of economic activity in Hong Kong. The Hang Seng index, a residential property price index, retail sales and total exports are used as coincident indicators. Principal component analysis is first used to obtain an impression of the common component of the indicator series. This component and the dynamic factor identified by the Stock–Watson methodology are strongly correlated and seem to capture economic fluctuations in Hong Kong reasonably well.
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