Financial Information and Macroeconomic Forecasts

34 Pages Posted: 7 Mar 2017

See all articles by Sophia Chen

Sophia Chen

International Monetary Fund (IMF) - Research Department

Romain Ranciere

International Monetary Fund (IMF)

Date Written: December 2016

Abstract

We study the forecasting power of financial variables for macroeconomic variables for 62 countries between 1980 and 2013. We find that financial variables such as credit growth, stock prices and house prices have considerable predictive power for macroeconomic variables at one to four quarters horizons. A forecasting model with financial variables outperforms the World Economic Outlook (WEO) forecasts in up to 85 percent of our sample countries at the four quarters horizon. We also find that cross-country panel models produce more accurate out-of-sample forecasts than individual country models.

Keywords: Economic forecasting, Credit expansion, Stock prices, Housing prices, Developed countries, Emerging markets, Low-income developing countries, Forecasting models, Variables (Mathematics), Time series, Macroeconomic Forecasting, Financial Markets and the Macroeconomy, CreditGrowth, Stock Price, House Price

JEL Classification: C53, E44, E47

Suggested Citation

Chen, Sophia and Ranciere, Romain, Financial Information and Macroeconomic Forecasts (December 2016). IMF Working Paper No. 16/251, Available at SSRN: https://ssrn.com/abstract=2924356

Sophia Chen (Contact Author)

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States

Romain Ranciere

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
60
Abstract Views
274
rank
388,024
PlumX Metrics