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Balance Sheets of Financial Intermediaries: Do They Forecast Economic Activity?

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  • Rodrigo Sekkel

Abstract

This paper conducts a real-time, out-of-sample analysis of the forecasting power of various aggregate financial intermediaries’ balance sheets to a wide range of economic activity measures in the United States. I find evidence that the balance sheets of leveraged financial institutions do have out-of-sample predictive power for future economic activity, and this predictability arises mainly through the housing sector. Nevertheless, I show that these variables have very little predictive power during periods of economic expansions and that predictability arises mainly during the financial crisis period.

Suggested Citation

  • Rodrigo Sekkel, 2014. "Balance Sheets of Financial Intermediaries: Do They Forecast Economic Activity?," Staff Working Papers 14-40, Bank of Canada.
    • Handle: RePEc:bca:bocawp:14-40
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    References listed on IDEAS

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    More about this item

    Keywords

    Econometric and statistical methods;

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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