The Information Content of Financial Aggregates in Australia

Ellis Tallman and Naveen Chandra
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Naveen Chandra: Reserve Bank of Australia

RBA Research Discussion Papers from Reserve Bank of Australia

Abstract: This paper examines the information provided by financial aggregates as predictors of real output and inflation. We employ vector autoregression (VAR) techniques to summarise the information in the data, providing evidence on the incremental forecasting value of financial aggregates in a range of forecasting systems for these variables. The in-sample results suggest significant predictive power in only a small number of cases. We then test the forecast performance of the VAR systems for two years out-of-sample in order to mimic more closely the real-time forecasting problem faced by policymakers. Overall, both in-sample and out-of-sample results suggest no robust finding of exploitable information for forecasting purposes in any of the financial aggregates under examination. There is some evidence that the aggregates yield improved forecasts late in the sample period, but there is insufficient subsequent data to draw robust conclusions from this.

JEL-codes: E40 E44 E51 (search for similar items in EconPapers)
Date: 1996-11
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Citations: View citations in EconPapers (7)

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Working Paper: The information content of financial aggregates in Australia (1996)
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Persistent link: https://EconPapers.repec.org/RePEc:rba:rbardp:rdp9606

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