Financial variables as leading indicators of GDP growth: Evidence from a MIDAS approach during the Great Recession
AbstractThe global economic recession, referred to as the Great Recession, endured by the main industrialized countries during the period 2008-09, in the wake of the financial and banking crisis, has pointed out the current importance of the financial sector in macroeconomics. In this paper, we evaluate the predictive power of some major financial variables to anticipate GDP growth in euro area countries during this specific period of time. In this respect, we implement a MIDAS-based modeling approach, put forward by Ghysels et al. (2007), that enables to forecast quarterly GDP growth rates using exogenous variables sampled at higher frequencies. Empirical results show that, overall, stock prices help to improve the accuracy of GDP forecasts by comparison with a standard opinion survey variable, while oil prices and term spread appear to be less informative.
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Bibliographic InfoPaper provided by University of Paris West - Nanterre la Défense, EconomiX in its series EconomiX Working Papers with number 2012-19.
Length: 8 pages
Date of creation: 2012
Date of revision:
Great Recession; Forecasting; Financial variables; MIDAS approach;
Other versions of this item:
- Laurent Ferrara & Clément Marsilli, 2013. "Financial variables as leading indicators of GDP growth: Evidence from a MIDAS approach during the Great Recession," Applied Economics Letters, Taylor and Francis Journals, vol. 20(3), pages 233-237, February.
- C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
- C5 - Mathematical and Quantitative Methods - - Econometric Modeling
- E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
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