Financial aggregates as conditioning information for Australian output and inflation
This paper examines whether financial aggregates provide information useful for predicting real output growth and inflation, extending the inquiry conducted in Tallman and Chandra (1996). First, we investigate whether perfect knowledge of the future values of financial aggregates helps improve significantly the forecasting accuracy of output and inflation in a simple vector autoregression framework. The results display only one notable improvement to the forecasts with the addition of perfect information on the financial aggregates—future information on credit growth helps improve the prediction accuracy of real output growth. The improvement is most noticeable during the early 1990s recession. Second, we test whether the financial aggregates are important explanators within single-equation models that are more rigorously fitted to the data. We find only one instance in which an aggregate helps explain the variation in either real output growth or inflation—that is, the growth in credit helps explain the growth in real output in a particular specification of the output model. This finding, though, is sensitive to the choice of foreign output proxy. In sum, we conclude that while credit may have some useful information in times of financial restructuring it is unlikely that there is information in financial aggregates that is exploitable systematically for predicting either real output growth or inflation.
|Date of creation:||1997|
|Contact details of provider:|| Postal: 1000 Peachtree St., N.E., Atlanta, Georgia 30309|
Web page: http://www.frbatlanta.org/
More information through EDIRC
|Order Information:|| Email: |
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.:
- Roberds, William & Whiteman, Charles H, 1992.
"Monetary Aggregates as Monetary Targets: A Statistical Investigation,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 24(2), pages 141-161, May.
- Charles H. Whiteman & William Roberds, 1990. "Monetary aggregates as monetary targets: a statistical investigation," FRB Atlanta Working Paper 90-7, Federal Reserve Bank of Atlanta.
- David Gruen & Geoffrey Shuetrim, 1994. "Internationalisation and the Macroeconomy," RBA Annual Conference Volume,in: Philip Lowe & Jacqueline Dwyer (ed.), International Intergration of the Australian Economy Reserve Bank of Australia.
- Ellis W. Tallman & Naveen Chandra, 1996. "The information content of financial aggregates in Australia," FRB Atlanta Working Paper 96-14, Federal Reserve Bank of Atlanta.
- Ellis W. Tallman & Naveen Chandra, 1996. "The Information Content of Financial Aggregates in Australia," RBA Research Discussion Papers rdp9606, Reserve Bank of Australia.
- Gruen, David & Romalis, John & Chandra, Naveen, 1999. "The Lags of Monetary Policy," The Economic Record, The Economic Society of Australia, vol. 75(230), pages 280-294, September.
- David Gruen & John Romalis & Naveen Chandra, 1997. "The Lags of Monetary Policy," RBA Research Discussion Papers rdp9702, Reserve Bank of Australia.
- de Brouwer, Gordon & Ericsson, Neil R, 1998. "Modeling Inflation in Australia," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(4), pages 433-449, October.
- Gordon de Brouwer & Neil R. Ericsson, 1995. "Modelling Inflation in Australia," RBA Research Discussion Papers rdp9510, Reserve Bank of Australia.
- Gordon De Brouwer & Neil R. Ericsson, 1995. "Modelling inflation in Australia," International Finance Discussion Papers 530, Board of Governors of the Federal Reserve System (U.S.).
- Estrella, Arturo & Mishkin, Frederic S., 1997. "Is there a role for monetary aggregates in the conduct of monetary policy?," Journal of Monetary Economics, Elsevier, vol. 40(2), pages 279-304, October.
- Arturo Estrella & Frederic S. Mishkin, 1996. "Is There a Role for Monetary Aggregates in the Conduct of Monetary Policy?," NBER Working Papers 5845, National Bureau of Economic Research, Inc.
- Mankiw, N. Gregory (ed.), 1997. "Monetary Policy," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226503097, July. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:fip:fedawp:97-8. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Elaine Clokey)
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.