Forecasting Macroeconomic Risks

33 Pages Posted: 21 Feb 2020

See all articles by Patrick A. Adams

Patrick A. Adams

MIT Sloan School of Management

Tobias Adrian

International Monetary Fund

Nina Boyarchenko

Federal Reserve Bank of New York

Domenico Giannone

Centre for Economic Policy Research (CEPR)

Date Written: February 1, 2020

Abstract

We construct risks around consensus forecasts of real GDP growth, unemployment, and inflation. We find that risks are time-varying, asymmetric, and partly predictable. Tight financial conditions forecast downside growth risk, upside unemployment risk, and increased uncertainty around the inflation forecast. Growth vulnerability arises as the conditional mean and conditional variance of GDP growth are negatively correlated: downside risks are driven by lower mean and higher variance when financial conditions tighten. Similarly, employment vulnerability arises as the conditional mean and conditional variance of unemployment are positively correlated, with tighter financial conditions corresponding to higher forecasted unemployment and higher variance around the consensus forecast.

Keywords: macroeconomic uncertainty, quantile regressions, financial conditions

JEL Classification: C22, E17, E37

Suggested Citation

Adams, Patrick A. and Adrian, Tobias and Boyarchenko, Nina and Giannone, Domenico, Forecasting Macroeconomic Risks (February 1, 2020). FRB of New York Staff Report No. 914, Available at SSRN: https://ssrn.com/abstract=3541286 or http://dx.doi.org/10.2139/ssrn.3541286

Patrick A. Adams

MIT Sloan School of Management ( email )

100 Main Street
Cambridge, MA 02142
United States

Tobias Adrian

International Monetary Fund ( email )

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

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

Nina Boyarchenko (Contact Author)

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
212-720-7339 (Phone)
212-720-1582 (Fax)

Domenico Giannone

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
21
Abstract Views
165
PlumX Metrics