Suchergebnisse

AbstractUsing Economic Tracking Portfolios (ETP), I find that it is possible to forecast future values of inflation and changes in industrial production in the United States and three core euro countries – Italy, France and Germany – utilizing only current and past financial market information. The longer the forecasting horizon, the better the forecasts based solely on financial market information compared to results from other methods. Of the countries I analyze, the overall forecasting performance of the tracking portfolios is the best for the U.S., and my method outperforms the forecasting performance of a VAR approach.

AbstractThe paper re‐examines the Finnish Great Depression of the 1990s, based on an open macro model, with specific dummy variables to identify the initial effects of liberalized financial markets and capital mobility, and of the Russian trade collapse. It is shown that the explosive credit expansion resulting from the simultaneous liberalization of the financial markets and international capital movements in 1986 has played the most important role in explaining the uncontrolled growth and the subsequent depression in 1989 in real economic activity in Finland. Their effects were strengthened by a vicious circle between the financial and asset markets. The Russian trade collapse in 1991 had a smaller partial effect on economic activity than did any other explanatory variable. The results suggest that some of the present day problems in the euro area, especially those occurring post‐2008 in the "Club Med" countries, are very alarming. In many cases, they are results of expansionary policies based on unsustainable capital imports, made possible by the introduction of the euro, and the consequences resemble in many ways those during the 1990s Great Depression period in Finland.

During the pre‐EMU period real effective exchange rate or domestic and foreign GDP per capita growth rate differential Granger‐caused aggregate trade balance in most of the EMU‐12 countries. However, our data‐driven paper provides evidence that during the EMU period neither the growth differentials nor the CPI‐based real effective exchange rates have Granger‐caused the aggregate trade balances. When we decompose the aggregate trade balances into the intra balances (trade balance vis‐à‐vis the euro area) and the extra balances (trade balance vis‐à‐vis the rest of the world), we find that typically the change in the dynamics of the aggregate trade balance resulted from a change in the dynamics of the intra balance.