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High-Frequency Credit Spread Information and Macroeconomic Forecast Revision

Author

Listed:
  • Bruno Deschamps

    (Nottingham University Business School China)

  • Christos Ioannidis

    (Aston Business School, Aston University)

  • Kook Ka

    (Economic Research Institute, Bank of Korea)

Abstract

We examine whether professional forecasters incorporate high-frequency information about credit conditions when revising their economic forecasts. Using Mixed Data Sampling regression approach, we find that daily credit spreads have significant predictive ability for monthly forecast revisions of output growth, at both aggregate and individual forecast levels. The relations are shown to be notably strong during ¡®bad¡¯ economic conditions, suggesting that forecasters anticipate more pronounced effects of credit tightening during economic downturns, indicating the amplification effect of financial developments on macroeconomic aggregates. Forecasts do not incorporate the totality of financial information received in equal measures, implying the presence of information rigidities in the incorporation of credit spread information.

Suggested Citation

  • Bruno Deschamps & Christos Ioannidis & Kook Ka, 2019. "High-Frequency Credit Spread Information and Macroeconomic Forecast Revision," Working Papers 2019-17, Economic Research Institute, Bank of Korea.
    • Handle: RePEc:bok:wpaper:1917
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    File URL: http://papers.bok.or.kr/RePEc_attach/wpaper/english/wp-2019-17.pdf
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    More about this item

    Keywords

    Forecast Revision; GDP Forecast; Credit Spread; High-Frequency Data; Mixed Data Sampling (MIDAS);
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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