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Balance sheets of financial intermediaries: Do they forecast economic activity?

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  • Sekkel, Rodrigo M.

Abstract

This paper conducts a real-time, out-of-sample analysis of the forecasting power of various aggregate financial intermediaries’ balance sheets for a wide range of economic activity measures in the United States. I find evidence that the balance sheets of leveraged financial institutions do have out-of-sample predictive power for future economic activity, and this predictability arises mainly through the housing sector. Nevertheless, I show that these variables have very little predictive power during periods of economic expansion, with predictability arising mainly during the financial crisis period.

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  • Sekkel, Rodrigo M., 2015. "Balance sheets of financial intermediaries: Do they forecast economic activity?," International Journal of Forecasting, Elsevier, vol. 31(2), pages 263-275.
    • Handle: RePEc:eee:intfor:v:31:y:2015:i:2:p:263-275
    DOI: 10.1016/j.ijforecast.2014.07.003
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    More about this item

    Keywords

    Financial intermediaries; Forecasting; Macro financial linkages;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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