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Do Financial Variables Provide Information about the Swiss Business Cycle ?

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  • Fabio ALESSANDRINI

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).

Suggested Citation

  • Fabio ALESSANDRINI, 2003. "Do Financial Variables Provide Information about the Swiss Business Cycle ?," Cahiers de Recherches Economiques du Département d'économie 03.02, Université de Lausanne, Faculté des HEC, Département d’économie.
    • Handle: RePEc:lau:crdeep:03.02
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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;Swiss Society for Financial Market Research, vol. 25(4), pages 435-453, December.
    2. Melvin Muzi Khomo & Meshach Jesse Aziakpono, 2007. "Forecasting Recession In South Africa: A Comparison Of The Yield Curve And Other Economic Indicators," South African Journal of Economics, Economic Society of South Africa, vol. 75(2), pages 194-212, June.

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    More about this item

    Keywords

    forecasting; probit model; term structure; business cycle;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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