Advanced Search
MyIDEAS: Login

Do Financial Variables Provide Information about the Swiss Business Cycle ?

Contents:

Author Info

  • Fabio ALESSANDRINI
Registered author(s):

    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).

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.hec.unil.ch/deep/textes/03.02.pdf
    Download Restriction: no

    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.

    as in new window
    Length: 62 pages
    Date of creation: Feb 2003
    Date of revision:
    Handle: RePEc:lau:crdeep:03.02

    Contact details of provider:
    Postal: Université de Lausanne, Faculté des HEC, DEEP, Internef, CH-1015 Lausanne
    Phone: ++41 21 692.33.64
    Fax: ++41 21 692.33.05
    Email:
    Web page: http://www.hec.unil.ch/deep/publications/cahiers/series
    More information through EDIRC

    Related research

    Keywords: forecasting; probit model; term structure; business cycle;

    Find related papers by JEL classification:

    This paper has been announced in the following NEP Reports:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Merton, Robert C, 1973. "An Intertemporal Capital Asset Pricing Model," Econometrica, Econometric Society, vol. 41(5), pages 867-87, September.
    2. Bernard, Henri J & Gerlach, Stefan, 1998. "Does the Term Structure Predict Recessions? The International Evidence," CEPR Discussion Papers 1892, C.E.P.R. Discussion Papers.
    3. E. P. Davis & S. G. B. Henry, 1994. "The Use of Financial Spreads as Indicator Variables: Evidence for the United Kingdom and Germany," IMF Staff Papers, Palgrave Macmillan, vol. 41(3), pages 517-525, September.
    4. Lucas, Robert E, Jr, 1978. "Asset Prices in an Exchange Economy," Econometrica, Econometric Society, vol. 46(6), pages 1429-45, November.
    5. Estrella, Arturo & Mishkin, Frederic S., 1997. "The predictive power of the term structure of interest rates in Europe and the United States: Implications for the European Central Bank," European Economic Review, Elsevier, vol. 41(7), pages 1375-1401, July.
    6. Fama, Eugene F. & French, Kenneth R., 1989. "Business conditions and expected returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 25(1), pages 23-49, November.
    7. Jorion, Philippe & Mishkin, Frederic, 1991. "A multicountry comparison of term-structure forecasts at long horizons," Journal of Financial Economics, Elsevier, vol. 29(1), pages 59-80, March.
    8. Fama, Eugene F, 1990. " Stock Returns, Expected Returns, and Real Activity," Journal of Finance, American Finance Association, vol. 45(4), pages 1089-1108, September.
    9. Arturo Estrella & Gikas A. Hardouvelis, 1989. "The term structure as a predictor of real economic activity," Research Paper 8907, Federal Reserve Bank of New York.
    10. Whitney K. Newey & Kenneth D. West, 1986. "A Simple, Positive Semi-Definite, Heteroskedasticity and AutocorrelationConsistent Covariance Matrix," NBER Technical Working Papers 0055, National Bureau of Economic Research, Inc.
    11. Nicolas A. Cuche, 2000. "Alternative Indicator of Moneary Policy for a Small Open Economy," Working Papers 00.12, Swiss National Bank, Study Center Gerzensee.
    12. Zuliu Hu, 1993. "The Yield Curve and Real Activity," IMF Working Papers 93/19, International Monetary Fund.
    13. Artis, Michael J & Kontolemis, Zenon G & Osborn, Denise, 1995. "Classical Business Cycles for G7 and European Countries," CEPR Discussion Papers 1137, C.E.P.R. Discussion Papers.
    14. Plosser, Charles I. & Geert Rouwenhorst, K., 1994. "International term structures and real economic growth," Journal of Monetary Economics, Elsevier, vol. 33(1), pages 133-155, February.
    15. Davis, E Philip & Henry, S G B & Pesaran, B, 1994. "The Role of Financial Spreads: Empirical Analysis of Spreads and Real Activity," The Manchester School of Economic & Social Studies, University of Manchester, vol. 62(4), pages 374-94, December.
    16. Junttila, Juha, 2002. "Forecasting the macroeconomy with current financial market information: Europe and the United States," Research Discussion Papers 2/2002, Bank of Finland.
    17. Nasseh, Alireza & Strauss, Jack, 2000. "Stock prices and domestic and international macroeconomic activity: a cointegration approach," The Quarterly Review of Economics and Finance, Elsevier, vol. 40(2), pages 229-245.
    18. Stock, J.H. & Watson, M.W., 1989. "New Indexes Of Coincident And Leading Economic Indicators," Papers 178d, Harvard - J.F. Kennedy School of Government.
    19. Chen, Nai-Fu, 1991. " Financial Investment Opportunities and the Macroeconomy," Journal of Finance, American Finance Association, vol. 46(2), pages 529-54, June.
    20. James H. Stock & Mark W. Watson, 1992. "A Procedure for Predicting Recessions With Leading Indicators: Econometric Issues and Recent Experience," NBER Working Papers 4014, National Bureau of Economic Research, Inc.
    21. Chen, Nai-Fu & Roll, Richard & Ross, Stephen A, 1986. "Economic Forces and the Stock Market," The Journal of Business, University of Chicago Press, vol. 59(3), pages 383-403, July.
    22. Kostas Tsatsaronis & Frank Smets, 1997. "Why does the yield curve predict economic activity? Dissecting the evidence for Germany and the United States," BIS Working Papers 49, Bank for International Settlements.
    23. Estrella, Arturo, 1998. "A New Measure of Fit for Equations with Dichotomous Dependent Variables," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(2), pages 198-205, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    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.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:lau:crdeep:03.02

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Claudine Delapierre Saudan).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.