Financial Information and Macroeconomic Forecasts

Author/Editor: Sophia Chen ; Romain Ranciere
Publication Date: December 23, 2016
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
Summary: 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.
Series: Working Paper No. 16/251
Subject(s): Economic forecasting | Credit expansion | Stock prices | Housing prices | Developed countries | Emerging markets | Low-income developing countries | Variables (Mathematics) | Forecasting models | Time series

Publication Date: December 23, 2016
ISBN/ISSN: 9781475563177/1018-5941 Format: Paper
Stock No: WPIEA2016251 Pages: 33
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