Growth at Risk: Concept and Application in IMF Country Surveillance

Abstract

The growth-at-risk (GaR) framework links current macrofinancial conditions to the distribution of future growth. Its main strength is its ability to assess the entire distribution of future GDP growth (in contrast to point forecasts), quantify macrofinancial risks in terms of growth, and monitor the evolution of risks to economic activity over time. By using GaR analysis, policymakers can quantify the likelihood of risk scenarios, which would serve as a basis for preemptive action. This paper offers practical guidance on how to conduct GaR analysis and draws lessons from country case studies. It also discusses an Excel-based GaR tool developed to support the IMF's bilateral surveillance efforts.

Keywords: Interest rates on loans, Economic growth, Economic recovery, External sector, Real interest rates, downside risk, macrofinancial linkages, financial stability, Gar, financial condition, forecast horizon, article IV consultation, quantiles

JEL Classification: E10, E17, F44, G10, G1, E01, G21, E52, E63, F16