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...

The authors use the permanent income hypothesis as the framework to analyze a number of results from recent empirical macroeconomic research. First, they demonstrate that the "productivity" shock isolated in both the three and six variable models of King, Plosser, Stock, and Watson (1991)...