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Probability predictions of rising real GDP growth and inflation: the usefulness of monetary indicators

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  • Donald Schunk

Abstract

Several recent studies have focused on the predictive power of the yield spread for future economic activity. The current paper reformulates the work of Estrella and Mishkin (1998) by focusing on the usefulness of monetary variables for generating probability predictions of rising or falling real GDP growth and inflation. Besides redefining the dependent variables, the independent monetary variables are allowed to include lagged information. Also, the current paper considers the usefulness of the Divisia monetary aggregates in the context of probit models for predicting the probability that real GDP growth or inflation will be increasing

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  • Donald Schunk, 2008. "Probability predictions of rising real GDP growth and inflation: the usefulness of monetary indicators," Applied Economics, Taylor & Francis Journals, vol. 40(9), pages 1139-1149.
    • Handle: RePEc:taf:applec:v:40:y:2008:i:9:p:1139-1149
    DOI: 10.1080/00036840600771247
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    Cited by:

    1. Javier Gomez-Biscarri, 2009. "The predictive power of the term spread revisited: a change in the sign of the predictive relationship," Applied Financial Economics, Taylor & Francis Journals, vol. 19(14), pages 1131-1142.

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