TY  - BOOK
AU  - Kongsamut,Piyabha
AU  - Mumssen,Christian
AU  - Paret,Anne-Charlotte
AU  - Tressel,Thierry
TI  - Incorporating Macro-Financial Linkages into Forecasts Using Financial Conditions Indices: The Case of France 
T2  - IMF Working Papers
SN  - 148433096X :
PY  - 2017///
CY  - Washington, D.C.
PB  - International Monetary Fund
KW  - Forecasting And Simulation
KW  - imf
KW  - General
KW  - Europe
N2  - How can information on financial conditions be used to better understand macroeconomic developments and improve macroeconomic projections? We investigate this question for France by constructing country-specific financial conditions indices (FCIs) that are tailored to movements in GDP, investment, private consumption and exports respectively. We rely on a VAR approach to estimate the weights of the financial components of each FCI, including equity market returns (which turn out having a relatively strong weight across all FCIs), private sector risk premiums, long-term interest rates, and banks' credit standards. We find that the tailored FCIs are useful as leading indicators of GDP, investment, and exports, and as a contemporaneous indicator of private consumption. Credit volumes turn out to be lagging indicators of growth. The indices inform us on macro-financial linkages in France and are used to improve the accuracy of quarterly forecasting models and high-frequency 'nowcast' models. We show that FCI-augmented models could have significantly improved forecasts during and after the global financial crisis
UR  - http://elibrary.imf.org/view/IMF001/24768-9781484330968/24768-9781484330968/24768-9781484330968.xml
UR  - http://www.imfbookstore.org/IMFORG/9781484330968
ER  -