Financial intermediation and informational efficiency: Predicting business cycles

Ujjal Chatterjee, Joseph French, Constantin Gurdgiev and Paul Borochin

International Review of Economics & Finance, 2024, vol. 96, issue PB

Abstract: Theory posits that financial intermediation (FI) spurs economic growth and supports financial system stability by reducing informational asymmetries and agency problems. Most of this literature focuses on bank lending and has limited success in capturing changes in macroeconomic aggregates. We consider a large set of different financial intermediaries to show that aggregate FI assets contain leading information about real GDP, investment, consumption, industrial production, and unemployment. Bank and shadow bank assets alone contain only limited information about future states of the economy. Overall, FI improves informational efficiency of the markets by providing transparent leading signals of the future economic conditions.

Keywords: Business cycles; Financial intermediation; Monetary policy; Financial stability (search for similar items in EconPapers)
JEL-codes: E44 E47 G12 G21 (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1059056024005999
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:96:y:2024:i:pb:s1059056024005999

DOI: 10.1016/j.iref.2024.103607

Access Statistics for this article

International Review of Economics & Finance is currently edited by H. Beladi and C. Chen

More articles in International Review of Economics & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().