Abstract

http://ssrn.com/abstract=299601
 
 

References (13)



 
 

Citations (44)



 


 



Do Financial Variables Help Forecasting Inflation and Real Activity in the Euro Area


Mario Forni


Università degli studi di Modena e Reggio Emilia (UNIMORE) - Faculty of Business and Economics; Centre for Economic Policy Research (CEPR)

Marc Hallin


ECARES, Universite Libre de Bruxelles

Marco Lippi


University of Rome I - Faculty of Statistics - Department of Economic Sciences

Lucrezia Reichlin


London Business School; Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES); Centre for Economic Policy Research (CEPR); European Central Bank (ECB)

January 2002

CEPR Discussion Paper No. 3146

Abstract:     
The Paper uses a large data set, consisting of 447 monthly macroeconomic time series concerning the main countries of the Euro area to simulate out-of-sample predictions of the Euro area industrial production and the harmonized inflation index and to evaluate the role of financial variables in forecasting. We considered two models which allow forecasting based on large panels of time series: Forni, Hallin, Lippi, and Reichlin (2000, 2001c) and Stock and Watson (1999). Performance of both models was compared to that of a simple univariate AR model. Results show that multivariate methods outperform univariate methods for forecasting inflation at one, three, six, and twelve months and industrial production at one and three months. We find that financial variables do help forecasting inflation, but do not help forecasting industrial production.

Number of Pages in PDF File: 19

Keywords: Dynamic factor models, principal components, business cycle, forecasting, financial variables

JEL Classification: C13, C33, C43

working papers series





Date posted: February 7, 2002  

Suggested Citation

Forni, Mario and Hallin, Marc and Lippi, Marco and Reichlin, Lucrezia, Do Financial Variables Help Forecasting Inflation and Real Activity in the Euro Area (January 2002). CEPR Discussion Paper No. 3146. Available at SSRN: http://ssrn.com/abstract=299601

Contact Information

Mario Forni (Contact Author)
Università degli studi di Modena e Reggio Emilia (UNIMORE) - Faculty of Business and Economics ( email )
Viale Berengario 51
41100 Modena, Modena 41100
Italy
+39 059 205 6852 (Phone)
+39 059 205 6947 (Fax)
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Marc Hallin
ECARES, Universite Libre de Bruxelles ( email )
Ave. Franklin D Roosevelt, 50 - C.P. 114
Brussels, B-1050
Belgium
+32 2 650 5886 (Phone)
+32 2 650 5899 (Fax)
Marco Lippi
University of Rome I - Faculty of Statistics - Department of Economic Sciences ( email )
14 Via Cesalpino
Rome, 00161
Italy
+39 06 4428 4202 (Phone)
+39 06 4404 572 (Fax)
Lucrezia Reichlin
London Business School ( email )
Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom
Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES) ( email )
Ave. Franklin D Roosevelt, 50 - C.P. 114
Brussels, B-1050
Belgium
+32 2 650 4221 (Phone)
+32 2 650 4475 (Fax)
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
European Central Bank (ECB) ( email )
Kaiserstrasse 29
Frankfurt am Main, D-60311
Germany
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Abstract Views: 961
Downloads: 24
References:  13
Citations:  44

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