Financial Information and Macroeconomic Forecasts
34 Pages Posted: 7 Mar 2017
Date Written: December 2016
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
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