Linear and threshold forecasts of output and inflation using stock and housing prices

Greg Tkacz () and Carolyn Wilkins
Additional contact information
Carolyn Wilkins: Bank of Canada, 234 Wellington Street, Ottawa, Ontario, Canada K1A 0G9, Postal: Bank of Canada, 234 Wellington Street, Ottawa, Ontario, Canada K1A 0G9

Journal of Forecasting, 2008, vol. 27, issue 2, 131-151

Abstract: This study examines whether simple measures of Canadian equity and housing price misalignments contain leading information about output growth and inflation. Previous authors have generally found that the information content of asset prices in general, and equity and housing prices in particular, are unreliable in that they do not systematically predict future economic activity or inflation. However, earlier studies relied on simple linear relationships that would fail to pick up the potential nonlinear effects of asset price misalignments. Our results suggest that housing prices are useful for predicting GDP growth, even within a linear context. Meanwhile, both stock and housing prices can improve inflation forecasts, especially when using a threshold specification. These improvements in forecast performance are relative to the information contained in Phillips-curve type indicators for inflation and IS-curve type indicators for GDP growth. Copyright © 2008 John Wiley & Sons, Ltd.

Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://hdl.handle.net/10.1002/for.1046 Link to full text; subscription required (text/html)

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:jof:jforec:v:27:y:2008:i:2:p:131-151

DOI: 10.1002/for.1046

Access Statistics for this article

Journal of Forecasting is currently edited by Derek W. Bunn

More articles in Journal of Forecasting from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley-Blackwell Digital Licensing () and Christopher F. Baum ().