Skip to main content
Kent Academic Repository

Predictive Financial Models of the Euro Area: A New Evaluation Test

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. (doi:10.1016/j.ijforecast.2007.04.001) (The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided) (KAR id:34290)

The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided.
Official URL:
http://dx.doi.org/10.1016/j.ijforecast.2007.04.001

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
DOI/Identification number: 10.1016/j.ijforecast.2007.04.001
Uncontrolled keywords: Forecasting accuracy; Financial variables; Output growth; Aggregation
Subjects: H Social Sciences > H Social Sciences (General)
Divisions: Divisions > Kent Business School - Division > Kent Business School (do not use)
Depositing User: Catherine Norman
Date Deposited: 13 Jun 2013 15:20 UTC
Last Modified: 16 Nov 2021 10:11 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/34290 (The current URI for this page, for reference purposes)

University of Kent Author Information

Panopoulou, Ekaterini.

Creator's ORCID: https://orcid.org/0000-0001-5080-9965
CReDIT Contributor Roles:
  • Depositors only (login required):

Total unique views for this document in KAR since July 2020. For more details click on the image.