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

Author

Listed:
  • Sophia Chen
  • Mrs. Paola Ganum
  • Mr. Pau Rabanal

Abstract

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.

Suggested Citation

  • Sophia Chen & Mrs. Paola Ganum & Mr. Pau Rabanal, 2017. "A Toolkit to Assess the Consistency Between Real Sector and Financial Sector Forecasts," IMF Technical Notes and Manuals 2017/009, International Monetary Fund.
    • Handle: RePEc:imf:imftnm:2017/009
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    Cited by:

    1. Bianchi, Benedetta, 2018. "Structural credit ratios," ESRB Working Paper Series 85, European Systemic Risk Board.

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