Your path in the tree: Start > Econometrics > Forecasting > Forecasting Economic Activity Using Financial Variables

Forecasting Economic Activity Using Financial Variables

Narrower topics in the RePEc Biblio tree

This RePEc Biblio topic is edited by Pierangelo De Pace (pde112). It was first published on 2013-01-25 13:59:28 and last updated on 2016-07-30 16:19:50.

Introduction by the editor

Financial variables, such as the prices of financial instruments, are commonly associated with expectations of future economic events. Long-term interest rates, for example, are frequently analyzed as weighted averages of expected future short-term interest rates. In this framework, spreads between rates of different maturities are interpreted as expectations of future rates corresponding to the period between the two maturities. Stock prices are similarly interpreted as expected discounted values of future dividend payments, and so incorporate views regarding both the future profitability of the firm and future interest or discounting rates. (Estrella and Mishkin, 1998)

Most relevant JEL codes

Most relevant research

  1. James H. Stock & Mark W. Watson, 1989, "New Indexes of Coincident and Leading Economic Indicators," NBER Chapters, National Bureau of Economic Research, Inc, "NBER Macroeconomics Annual 1989, Volume 4".
  2. James H. Stock & Mark W. Watson, 2003, "How did leading indicator forecasts perform during the 2001 recession?," Economic Quarterly, Federal Reserve Bank of Richmond, volume 89, issue Sum, pages 71-90.
  3. 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, volume 91, issue Sep, pages 419-440.
  4. Michael Dotsey, 1998, "The predictive content of the interest rate term spread for future economic growth," Economic Quarterly, Federal Reserve Bank of Richmond, issue Sum, pages 31-51.
  5. Estrella, Arturo & Hardouvelis, Gikas A, 1991, "The Term Structure as a Predictor of Real Economic Activity," Journal of Finance, American Finance Association, volume 46, issue 2, pages 555-576, June.
  6. Arturo Estrella & Frederic S. Mishkin, 1998, "Predicting U.S. Recessions: Financial Variables As Leading Indicators," The Review of Economics and Statistics, MIT Press, volume 80, issue 1, pages 45-61, February.
  7. Arturo Estrella & Anthony P. Rodrigues & Sebastian Schich, 2003, "How Stable is the Predictive Power of the Yield Curve? Evidence from Germany and the United States," The Review of Economics and Statistics, MIT Press, volume 85, issue 3, pages 629-644, August.
  8. Arturo Estrella, 2005, "Why Does the Yield Curve Predict Output and Inflation?," Economic Journal, Royal Economic Society, volume 115, issue 505, pages 722-744, July.
  9. Jon Faust & Simon Gilchrist & Jonathan H. Wright & Egon Zakrajsek, 2011, "Credit Spreads as Predictors of Real-Time Economic Activity: A Bayesian Model-Averaging Approach," NBER Working Papers, National Bureau of Economic Research, Inc, number 16725, Jan.
  10. Jon Faust & Jonathan H. Wright, 2007, "Comparing Greenbook and Reduced Form Forecasts using a Large Realtime Dataset," NBER Working Papers, National Bureau of Economic Research, Inc, number 13397, Sep.
  11. Jonathan H. Wright, 2006, "The yield curve and predicting recessions," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.), number 2006-07.
  12. Ang, Andrew & Piazzesi, Monika & Wei, Min, 2006, "What does the yield curve tell us about GDP growth?," Journal of Econometrics, Elsevier, volume 131, issue 1-2, pages 359-403.
  13. Gertler, Mark & Lown, Cara S, 1999, "The Information in the High-Yield Bond Spread for the Business Cycle: Evidence and Some Implications," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, volume 15, issue 3, pages 132-150, Autumn.
  14. Gilchrist, Simon & Yankov, Vladimir & Zakrajsek, Egon, 2009, "Credit market shocks and economic fluctuations: Evidence from corporate bond and stock markets," Journal of Monetary Economics, Elsevier, volume 56, issue 4, pages 471-493, May.
  15. Ashoka Mody & Mark P. Taylor, 2003, "The High-Yield Spread as a Predictor of Real Economic Activity: Evidence of a Financial Accelerator for the United States," IMF Staff Papers, Palgrave Macmillan, volume 50, issue 3, pages 1-3.
  16. Mody, Ashoka & Taylor, Mark P., 2004, "Financial predictors of real activity and the financial accelerator," Economics Letters, Elsevier, volume 82, issue 2, pages 167-172, February.
  17. James H. Stock & Mark W. Watson, 1992, "A procedure for predicting recessions with leading indicators: econometric issues and recent performance," Working Paper Series, Macroeconomic Issues, Federal Reserve Bank of Chicago, number 92-7.
  18. Pierangelo De Pace, 2013, "Gross Domestic Product Growth Predictions Through The Yield Spread: Time‐Variation And Structural Breaks," International Journal of Finance & Economics, John Wiley & Sons, Ltd., volume 18, issue 1, pages 1-24, January.
  19. De Pace, Pierangelo & Weber, Kyle D., 2016, "The time-varying leading properties of the high yield spread in the United States," International Journal of Forecasting, Elsevier, volume 32, issue 1, pages 203-230, DOI: 10.1016/j.ijforecast.2015.01.008.
  20. Simon Gilchrist & Egon Zakrajsek, 2012, "Credit Spreads and Business Cycle Fluctuations," American Economic Review, American Economic Association, volume 102, issue 4, pages 1692-1720, June.