Panopoulou, Ekaterini (2007) Predictive financial models of the euro area: A new evaluation test. International Journal of Forecasting, 23 (4). pp. 695-705. ISSN 0169-2070
Preview
1-s2.0-S016920700700043X-main.pdf
Available under License Creative Commons Attribution Non-commercial Share Alike.
Download (182kB) | Preview
Abstract
This paper investigates the predictive ability of financial variables for euro area growth. Our forecasts are built from
univariate autoregressive and single equation models. Euro area aggregate forecasts are constructed both by employing
aggregate variables and by aggregating country-specific forecasts. The forecast evaluation is based on a recently developed test
for equal predictive ability between nested models. Employing a monthly dataset from the period between January 1988 and
May 2005 and setting the out-of-sample period to be from 2001 onwards, we find that the single most powerful predictor on a
country basis is the stock market returns, followed by money supply growth. However, for the euro area aggregate, the set of
most powerful predictors includes interest rate variables as well. The forecasts from pooling individual country models
outperform those from the aggregate itself for short run forecasts, while for longer horizons this pattern is reversed. Additional
benefits are obtained when combining information from a range of variables or combining model forecasts.
Item Type: | Article |
---|---|
Keywords: | Forecasting accuracy; Financial variables; Output growth; Aggregation; |
Academic Unit: | Faculty of Social Sciences > Economics, Finance and Accounting |
Item ID: | 20621 |
Identification Number: | 10.1016/j.ijforecast.2007.04.001 |
Depositing User: | IR Editor |
Date Deposited: | 29 Sep 2025 11:21 |
Journal or Publication Title: | International Journal of Forecasting |
Publisher: | Elsevier |
Refereed: | Yes |
Related URLs: | |
URI: | https://mural.maynoothuniversity.ie/id/eprint/20621 |
Use Licence: | This item is available under a Creative Commons Attribution Non Commercial Share Alike Licence (CC BY-NC-SA). Details of this licence are available here |
Repository Staff Only (login required)
Downloads
Downloads per month over past year