The Term Structure of Growth-at-Risk

41 Pages Posted: 22 Aug 2018

See all articles by Tobias Adrian

Tobias Adrian

International Monetary Fund

Federico Grinberg

International Monetary Fund

Nellie Liang

Brookings Institution

Sheheryar Malik

International Monetary Fund (IMF)

Date Written: August 2018

Abstract

Using panel quantile regressions for 11 advanced and 10 emerging market economies, weshow that the conditional distribution of GDP growth depends on financial conditions, withgrowth-at-risk (GaR)-defined as growth at the lower 5th percentile-more responsive thanthe median or upper percentiles. In addition, the term structure of GaR features anintertemporal tradeoff: GaR is higher in the short run; but lower in the medium run wheninitial financial conditions are loose relative to typical levels, and the tradeoff is amplified bya credit boom. This shift in the growth distribution generally is not incorporated whensolving dynamic stochastic general equilibrium models with macrofinancial linkages, whichsuggests downside risks to GDP growth are systematically underestimated.

Keywords: Financial stability, downside risk, macrofinancial linkages, volatility paradox, quantile regression, General, International Business Cycles

JEL Classification: G10, E10, F44

Suggested Citation

Adrian, Tobias and Grinberg, Federico and Liang, Nellie and Malik, Sheheryar, The Term Structure of Growth-at-Risk (August 2018). IMF Working Paper No. 18/180, Available at SSRN: https://ssrn.com/abstract=3236794

Tobias Adrian (Contact Author)

International Monetary Fund ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

HOME PAGE: http://www.tobiasadrian.com

Federico Grinberg

International Monetary Fund ( email )

700 19th St NW
Washington, DC 20431
United States

Nellie Liang

Brookings Institution

1775 Massachusetts Ave, NW
Washington, DC 20036
United States

Sheheryar Malik

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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