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Do Financial Variables Provide Information about the Swiss Business Cycle ?

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  • Fabio ALESSANDRINI
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    Abstract

    This paper extends the literature on the information content of financial variables with respect to future economic growth. It shows that variables originating from both the equity market and the bond market in Switzerland are useful indicators for forecasting the Swiss business cycle. In particular, the difference between risk-free long-term and short-term rates is an effcient indicator for both the amplitude and the timing, especially over long forecasting horizons. Part of this power seems however to be linked to monetary policy. Contrary to evidence from the US, equity returns are useful only in forecasting the timing of the cycle. It is also shown that financial variables, coupled with indicators from the real economy, form the most effcient combination for forecasting economic growth at all time horizons. Moreover, foreign financial variables also provide useful information. This paper uses for the first time the business cycle dates for Switzerland computed recently by Amstad (2000).

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    Bibliographic Info

    Paper provided by Université de Lausanne, Faculté des HEC, DEEP in its series Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) with number 03.02.

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    Length: 62 pages
    Date of creation: Feb 2003
    Date of revision:
    Handle: RePEc:lau:crdeep:03.02

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    Postal: Université de Lausanne, Faculté des HEC, DEEP, Internef, CH-1015 Lausanne
    Phone: ++41 21 692.33.64
    Fax: ++41 21 692.33.05
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    Web page: http://www.hec.unil.ch/deep/publications/cahiers/series
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    Keywords: forecasting; probit model; term structure; business cycle;

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    References

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    Cited by:
    1. Mario Meichle & Angelo Ranaldo & Attilio Zanetti, 2011. "Do financial variables help predict the state of the business cycle in small open economies? Evidence from Switzerland," Financial Markets and Portfolio Management, Springer, vol. 25(4), pages 435-453, December.

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