Autori
Fornari, Fabio
Mele, Antonio

Titolo
Financial Volatility and Economic Activity
Periodico
Journal of financial management, markets and institutions (Online)
Anno: 2013 - Fascicolo: 2 - Pagina iniziale: 155 - Pagina finale: 198

Does uncertainty in capital markets affect the business cycle? We find that financial volatility predicts 30% of post-war economic activity in the United States, and that during the Great Moderation, aggregatestock market volatility explains, alone, up to 55% of real growth. In out-of-sample tests, stock price volatility helps predict turning points over and above traditional financial variables such as credit or term spreads, and other leading indicators. Combining stock volatility and the term spread leads to a proxy for (i) aggregaterisk, (ii) risk-premiums and (iii) a gauge of monetary policy conduct, which tracks and anticipates the business cycle. At the heart of our analysis is a notion of volatility based on a slowly changing measureof return variability. This volatility is designed to capture long-run uncertainty in capital markets, and is particularly successful at explaining trends in the economic activity at horizons of six months and one year.



SICI: 2282-717X(2013)2<155:FVAEA>2.0.ZU;2-S
Testo completo: http://www.mulino.it/download/article/10.12831/75569
Testo completo alternativo: http://www.mulino.it/doi/10.12831/75569

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