It takes a panel to predict the future: What the stock market says about future economic growth in Canada

Greg Adams and Jean-Sebastien Fontaine

No 2023-9, Staff Analytical Notes from Bank of Canada

Abstract: Throughout 2022, the Canadian economy faced persistently high inflation. The Bank of Canada responded forcefully by increasing the target rate by 425 basis points between March 2022 and January 2023. These increases led investors to expect slower economic growth in Canada, and these expectations are evident in the drop in earnings forecasts for companies whose stocks are traded on the TSX. This provided policy-makers with an early sign that higher interest rates would be effective and slow economic growth because these forecasts fell more for companies that are more sensitive to interest rates.

Keywords: Asset pricing; Financial markets; Monetary policy transmission (search for similar items in EconPapers)
JEL-codes: E47 E52 (search for similar items in EconPapers)
Date: 2023-07
New Economics Papers: this item is included in nep-cba and nep-fdg
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