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Are Market Views on Banking Industry Useful for Forecasting Economic Growth?

Author

Listed:
  • VAN SON LAI
  • XIAOXIA YE
  • LU ZHAO

Abstract

Using two market-based variables, namely the regulatory forbearance fraction imbedded in the bank capital and the market-valued of the bank equity-to-assets ratio, derived from market equity and total liabilities from listed commercial banks in the U.S. and three countries (Japan, China, India) and a region (Southeast Asia) in Asia, we show compelling evidence that market views on banking industry have significant predictive power on economic growth after controlling for stock, bond, and inflation variables. The current paper further contributes to the literature on interaction between the financial intermediation and the economic growth by showing evidence of market perceptions of the banking industry impacting the real economic activities.

Suggested Citation

  • Van Son Lai & Xiaoxia Ye & Lu Zhao, 2018. "Are Market Views on Banking Industry Useful for Forecasting Economic Growth?," Working Papers 2018-001, Department of Research, Ipag Business School.
    • Handle: RePEc:ipg:wpaper:2018-001
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    Cited by:

    1. Van Son Lai & Xiaoxia Ye, 2019. "How Does the Stock Market View Bank Regulatory Capital Forbearance Policies?," Working Papers 2019-012, Department of Research, Ipag Business School.

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    More about this item

    Keywords

    Bank regulatory; Regulatory forbearance; Forecasting; Economic growth;
    All these keywords.

    JEL classification:

    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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