EconPapers    
Economics at your fingertips  
 

Do Financial Variables Help Forecasting Inflation and Real Activity in the Euro Area?

Mario Forni (), Marc Hallin (), Marco Lippi () and Lucrezia Reichlin ()

No 3146, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The Paper uses a large data set, consisting of 447 monthly macroeconomic time series concerning the main countries of the Euro area to simulate out-of-sample predictions of the Euro area industrial production and the harmonized inflation index and to evaluate the role of financial variables in forecasting. We considered two models which allow forecasting based on large panels of time series: Forni, Hallin, Lippi, and Reichlin (2000, 2001c) and Stock and Watson (1999). Performance of both models was compared to that of a simple univariate AR model. Results show that multivariate methods outperform univariate methods for forecasting inflation at one, three, six, and twelve months and industrial production at one and three months. We find that financial variables do help forecasting inflation, but do not help forecasting industrial production.

Keywords: business cycle; dynamic factor models; financial variables; forecasting; principal componants (search for similar items in EconPapers)
JEL-codes: C13 C33 C43 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm, nep-eec and nep-mac
Date: 2002-01
References: View complete reference list from CitEc
Citations: View citations in EconPapers (25) Track citations by RSS feed

Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=3146 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: Do financial variables help forecasting inflation and real activity in the euro area? (2003) Downloads
Working Paper: Do financial variables help forecasting inflation and real activity in the Euro area ? (2003) Downloads
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:cpr:ceprdp:3146

Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... ers/dp.php?dpno=3146

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().

 
Page updated 2019-10-19
Handle: RePEc:cpr:ceprdp:3146