Financial variables as leading indicators of GDP growth: Evidence from a MIDAS approach during the Great Recession

Laurent Ferrara and Clément Marsilli

Working Papers from HAL

Abstract: The global economic recession, referred to as the Great Recession, endured by the main industrialized countries during the period 2008-09, in the wake of the financial and banking crisis, has pointed out the current importance of the financial sector in macroeconomics. In this paper, we evaluate the predictive power of some major financial variables to anticipate GDP growth in euro area countries during this specific period of time. In this respect, we implement a MIDAS-based modeling approach, put forward by Ghysels et al. (2007), that enables to forecast quarterly GDP growth rates using exogenous variables sampled at higher frequencies. Empirical results show that, overall, stock prices help to improve the accuracy of GDP forecasts by comparison with a standard opinion survey variable, while oil prices and term spread appear to be less informative.

Keywords: Great Recession; Forecasting; Financial variables; MIDAS approach (search for similar items in EconPapers)
Date: 2012
Note: View the original document on HAL open archive server: https://hal.science/hal-04141077
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Related works:
Journal Article: Financial variables as leading indicators of GDP growth: Evidence from a MIDAS approach during the Great Recession (2013)
Working Paper: Financial variables as leading indicators of GDP growth: Evidence from a MIDAS approach during the Great Recession (2013)
Working Paper: Financial variables as leading indicators of GDP growth: Evidence from a MIDAS approach during the Great Recession (2012)
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