What does a financial system say about future economic growth?
AbstractIn many research studies it is argued that it is possible to extract useful information about future economic growth from the performance of financial markets. However, this study goes further and shows that it is not only possible to use expectations derived from financial markets to forecast future economic growth, but that data about the financial system can be used for this purpose as well. The research is conducted for the Polish emerging economy on the basis of monthly data. The results suggest that, based purely on the data from the financial system, it is possible to construct reasonable measures that can, even for an emerging economy, effectively forecast future real economic activity. The outcomes are proved by two various econometric methods, namely, by a time series analysis and by a probit model. All presented models are tested in-sample and out-of-sample.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 11560.
Date of creation: 12 Sep 2008
Date of revision:
CCAPM; economic growth; financial markets; term spreads; expectations; forecasting;
Find related papers by JEL classification:
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-11-25 (All new papers)
- NEP-FDG-2008-11-25 (Financial Development & Growth)
- NEP-FOR-2008-11-25 (Forecasting)
- NEP-MAC-2008-11-25 (Macroeconomics)
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