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Forecasting GDP growth with financial market data in Finland: Revisiting stylized facts in a small open economy during the financial crisis

  • Kuosmanen, Petri
  • Vataja, Juuso
Registered author(s):

    This paper examines the ability of financial variables to predict future economic growth above and beyond past economic activity in a small open economy in the euro area. We aim to clarify potential differences in forecasting economic activity during different economic circumstances.

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    File URL: http://www.sciencedirect.com/science/article/pii/S105833001300061X
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    Article provided by Elsevier in its journal Review of Financial Economics.

    Volume (Year): 23 (2014)
    Issue (Month): 2 ()
    Pages: 90-97

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    Handle: RePEc:eee:revfin:v:23:y:2014:i:2:p:90-97
    DOI: 10.1016/j.rfe.2013.10.002
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620170

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    1. Ang, Andrew & Piazzesi, Monika & Wei, Min, 2006. "What does the yield curve tell us about GDP growth?," Journal of Econometrics, Elsevier, vol. 131(1-2), pages 359-403.
    2. David C. Wheelock & Mark E. Wohar, 2009. "Can the term spread predict output growth and recessions? a survey of the literature," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 419-440.
    3. Harvey, Campbell R., 1988. "The real term structure and consumption growth," Journal of Financial Economics, Elsevier, vol. 22(2), pages 305-333, December.
    4. Todd E. Clark & Michael W. McCracken, 1999. "Tests of equal forecast accuracy and encompassing for nested models," Research Working Paper 99-11, Federal Reserve Bank of Kansas City.
    5. Todd E. Clark & Kenneth D. West, 2005. "Approximately normal tests for equal predictive accuracy in nested models," Research Working Paper RWP 05-05, Federal Reserve Bank of Kansas City.
    6. repec:kap:iaecre:v:16:y:2010:i:1:p:1-10 is not listed on IDEAS
    7. Menzie Chinn & Kavan Kucko, 2015. "The Predictive Power of the Yield Curve Across Countries and Time," International Finance, Wiley Blackwell, vol. 18(2), pages 129-156, 06.
    8. Robert D. Laurent, 1989. "Testing the "spread"," Economic Perspectives, Federal Reserve Bank of Chicago, issue Jul, pages 22-34.
    9. Duarte, Agustin & Venetis, Ioannis A. & Paya, Ivan, 2005. "Predicting real growth and the probability of recession in the Euro area using the yield spread," International Journal of Forecasting, Elsevier, vol. 21(2), pages 261-277.
    10. James H. Stock & Mark W.Watson, 2003. "Forecasting Output and Inflation: The Role of Asset Prices," Journal of Economic Literature, American Economic Association, vol. 41(3), pages 788-829, September.
    11. Elliott, Graham & Rothenberg, Thomas J & Stock, James H, 1996. "Efficient Tests for an Autoregressive Unit Root," Econometrica, Econometric Society, vol. 64(4), pages 813-36, July.
    12. Michael D. Bordo & Joseph G Haubrich, 2004. "The Yield Curve, Recessions and the Credibility of the Monetary Regime: Long Run Evidence 1875-1997," NBER Working Papers 10431, National Bureau of Economic Research, Inc.
    13. Kinnunen, Helvi, 1998. "The sources of output shocks in Finland and other EU countries," Research Discussion Papers 3/1998, Bank of Finland.
    14. Serena Ng & Pierre Perron, 2001. "LAG Length Selection and the Construction of Unit Root Tests with Good Size and Power," Econometrica, Econometric Society, vol. 69(6), pages 1519-1554, November.
    15. Ólan T. Henry & Nilss Olekalns & Jonathan Thong, 2004. "Do stock market returns predict changes to output? Evidence from a nonlinear panel data model," Empirical Economics, Springer, vol. 29(3), pages 527-540, 09.
    16. Joseph G. Haubrich & Ann M. Dombrosky, 1996. "Predicting real growth using the yield curve," Economic Review, Federal Reserve Bank of Cleveland, issue Q I, pages 26-35.
    17. Kuosmanen, Petri & Vataja, Juuso, 2011. "The role of stock markets vs. the term spread in forecasting macrovariables in Finland," The Quarterly Review of Economics and Finance, Elsevier, vol. 51(2), pages 124-132, May.
    18. McCracken, Michael W., 2007. "Asymptotics for out of sample tests of Granger causality," Journal of Econometrics, Elsevier, vol. 140(2), pages 719-752, October.
    19. Henri Nyberg, 2010. "Dynamic probit models and financial variables in recession forecasting," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 29(1-2), pages 215-230.
    20. Estrella, Arturo & Hardouvelis, Gikas A, 1991. " The Term Structure as a Predictor of Real Economic Activity," Journal of Finance, American Finance Association, vol. 46(2), pages 555-76, June.
    21. Massimiliano Marcellino & James Stock & Mark Watson, 2005. "A Comparison of Direct and Iterated Multistep AR Methods for Forecasting Macroeconomic Time Series," Working Papers 285, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    22. Junttila, Juha & Korhonen, Marko, 2011. "Utilizing financial market information in forecasting real growth, inflation and real exchange rate," International Review of Economics & Finance, Elsevier, vol. 20(2), pages 281-301, April.
    23. Michael D. Bordo & Joseph G. Haubrich, 2006. "Forecasting with the yield curve; level, slope, and output 1875-1997," Working Paper 0611, Federal Reserve Bank of Cleveland.
    24. Arturo Estrella & Frederic S. Mishkin, 1996. "The yield curve as a predictor of U.S. recessions," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 2(Jun).
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