The Information Content of Financial Aggregates in Australia
AbstractThis paper examines the information provided by financial aggregates as predictors of real output and inflation. We employ vector autoregression (VAR) techniques to summarise the information in the data, providing evidence on the incremental forecasting value of financial aggregates in a range of forecasting systems for these variables. The in-sample results suggest significant predictive power in only a small number of cases. We then test the forecast performance of the VAR systems for two years out-of-sample in order to mimic more closely the real-time forecasting problem faced by policymakers. Overall, both in-sample and out-of-sample results suggest no robust finding of exploitable information for forecasting purposes in any of the financial aggregates under examination. There is some evidence that the aggregates yield improved forecasts late in the sample period, but there is insufficient subsequent data to draw robust conclusions from this.
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Bibliographic InfoPaper provided by Reserve Bank of Australia in its series RBA Research Discussion Papers with number rdp9606.
Date of creation: Nov 1996
Date of revision:
Other versions of this item:
- Ellis W. Tallman & Naveen Chandra, 1996. "The information content of financial aggregates in Australia," Working Paper 96-14, Federal Reserve Bank of Atlanta.
- E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
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