The information content of financial aggregates in Australia
AbstractThis paper examines whether financial aggregates provide information useful for predicting the subsequent behavior of real output and inflation. We employ vector autoregression (VAR) techniques to summarize the information in the data, providing evidence on the incremental forecasting value of financial aggregates for forecasting real output and inflation. The in-sample results suggest that there are only a few situations in which knowledge of the aggregates helps forecast real output and inflation. We then test the forecast performance of the VAR systems for two years out-of-sample in order to mimic more closely the real-time forecasting problem faced by policymakers. We compare the out-of-sample forecast accuracy of VAR systems including a financial aggregate with the corresponding system excluding the financial aggregate. Overall, both in-sample and out-of-sample results suggest no robust finding of exploitable information that is useful for policymakers in any of the financial aggregates under examination.
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Bibliographic InfoPaper provided by Federal Reserve Bank of Atlanta in its series Working Paper with number 96-14.
Date of creation: 1996
Date of revision:
Other versions of this item:
- Ellis W. Tallman & Naveen Chandra, 1996. "The Information Content of Financial Aggregates in Australia," RBA Research Discussion Papers rdp9606, Reserve Bank of Australia.
- E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
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- Feridun, M. & Adebiyi, M.A., 2006. "Forecasting Inflation in Developing Economies: The Case of Nigeria, 1986-1998," International Journal of Applied Econometrics and Quantitative Studies, Euro-American Association of Economic Development, vol. 3(1), pages 55-84.
- Ellis W. Tallman & Naveen Chandra, 1997.
"Financial Aggregates as Conditioning Information for Australian Output and Inflation,"
RBA Research Discussion Papers
rdp9704, Reserve Bank of Australia.
- Ellis W. Tallman & Naveen Chandra, 1997. "Financial aggregates as conditioning information for Australian output and inflation," Working Paper 97-8, Federal Reserve Bank of Atlanta.
- Simatele, Munacinga C H, 2004. "Financial sector reforms and monetary policy reforms in Zambia," MPRA Paper 21575, University Library of Munich, Germany.
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