Forecasting Australian monetary aggregates
Australian banking risk: evidence from share prices
We use share price data to calculate bank asset volatilities, market capital-asset ratios, and the public-sector depositor protection liability for Australia. The results show that the average capital ratio for the Australian banking sector has risen over the past decade, while the riskiness of bank assets has increased slightly. An examination of the relationship between asset volatility and bank capital implies that riskier banks have tended to maintain higher capital ratios, with a similar positive relationship between the two variables over time at individual banks. We find that the ...
The information content of financial aggregates in Australia
This paper examines whether financial aggregates provide information useful for predicting the subsequent behavior of real output and inflation. We employ vector autoregression (VAR) techniques to summarize the information in the data, providing evidence on the incremental forecasting value of financial aggregates for forecasting real output and inflation. The in-sample results suggest that there are only a few situations in which knowledge of the aggregates helps forecast real output and inflation. We then test the forecast performance of the VAR systems for two years out-of-sample in order ...
Financial aggregates as conditioning information for Australian output and inflation
This paper examines whether financial aggregates provide information useful for predicting real output growth and inflation, extending the inquiry conducted in Tallman and Chandra (1996). First, we investigate whether perfect knowledge of the future values of financial aggregates helps improve significantly the forecasting accuracy of output and inflation in a simple vector autoregression framework. The results display only one notable improvement to the forecasts with the addition of perfect information on the financial aggregates?future information on credit growth helps improve the ...
Financial reform in Australia and New Zealand