Linkages between Financial and Macroeconomic Indicators in Emerging Markets and Developing Economies

This paper provides empirical evidence on the finance-growth nexus with the key contributions being our focus on previously unexplored Emerging Markets and Developing Economies (EMDEs) and using mixed frequencies. Using Fixed Effects and MIDAS panel regressions for 50 countries (1990-2019), we examine the forecasting reliability of macroeconomic indicators (e.g. aggregate production) by financial indicators (e.g. national stock indices). Our results support the notion that financial indicators are statistically significant determinants of macroeconomic indicators; useful for policymakers, as timely, reliable data on real indicators are hard to come by in EMDEs. Use of MIDAS panel regressions improves the predictive power of the models