Technical Notes and Manuals

A Toolkit to Assess the Consistency Between Real Sector and Financial Sector Forecasts

By Sophia Chen, Paola Ganum, Pau Rabanal

June 5, 2017

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Sophia Chen, Paola Ganum, and Pau Rabanal. A Toolkit to Assess the Consistency Between Real Sector and Financial Sector Forecasts, (USA: International Monetary Fund, 2017) accessed December 6, 2024

Disclaimer: This Technical Guidance Note should not be reported as representing the views of the IMF. The views expressed in this Note are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

e develop a toolkit to assess the consistency between real sector and financial sector forecasts. The toolkit draws upon empirical regularities on real sector and financial sector outcomes for 182 economies from 1980 to 2015. We show that credit growth is positively correlated with real sector performance, in particular when credit growth is unusually high or low. However, the relationship between credit growth and inflation is weak. These results hold for different country groups, including advanced economies, emerging markets and low-income countries. Combining credit growth with other variables such as house prices and the output gap helps to understand real sector outcomes. But including the financial account balance does not make a difference.

Subject: Credit, Economic sectors, Emerging and frontier financial markets, Financial markets, Financial sector, Housing prices, Money, Output gap, Prices, Production

Keywords: Asset price fluctuation, Comovement, Consistency, Credit, Credit condition, Credit growth, Emerging and frontier financial markets, Equity price appreciation, Financial Forecasts, Financial sector, GDP growth, Global, House price growth, Housing prices, Macroeconomic Forecasts, Output gap, Price, Real GDP, TNM

Publication Details

  • Pages:

    30

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Technical Notes and Manuals No. 2017/009

  • Stock No:

    TNMEA2017009

  • ISBN:

    9781484302798

  • ISSN:

    2075-8669