Forecasting Macroeconomic Risk in Real Time: Great and Covid-19 Recessions

Medium-Term Growth-at-Risk in the Euro Area

“…The existing literature points to the importance of financial conditions/financial stress for GDP tail risk at short horizons, mostly 1-4 quarters ahead (Adrian et al, 2022(Adrian et al, , 2019Chavleishvili and Manganelli, 2019;Ferrara et al, 2022;Figueres and Jarocinski, 2020;Giglio et al, 2016;De Santis and Van der Veken, 2020). Our results, however, point to a rather less important role of financial stress indicators at the 1-year horizon.…”

“…Both vulnerability indicators reached elevated levels across countries well in advance of the episodes with low real GDP growth indicated above, suggesting potential leading information for growth-at-risk over the medium term. Most of the existing growth-at-risk literature has focused on financial conditions or financial stress indices as key explanatory variables (Adrian et al, 2022(Adrian et al, , 2019Figueres and Jarocinski, 2020;De Santis and Van der Veken, 2020). While financial condition indices typically contain information about financial stress and financial vulnerabilities, they are generally closer to stress indicators.…”

“…We then add each of the potential indicators to this benchmark model one at a time. In addition, we also consider models with an additional lag of the potential indicators (indicated as +lag), models that allow for a different impact when the indicator is larger than zero (denoted by +int), and models that 6 Most papers that use a formal metric for model evaluation employ either the tick loss function (Brownlees and Souza, 2021;Carriero et al, 2020;Figueres and Jarocinski, 2020;Giacomini and Komunjer, 2005) or predictive scores (Adams et al, 2021;Adrian et al, 2019;De Santis and Van der Veken, 2020). Since our focus is not on density forecasts, we follow the literature and use the tick loss approach in our in-sample and out-of-sample exercises.…”

La modélisation économique à l’appui du choix public dans l’urgence de la pandémie de Covid-19

“…Parmi les contributeurs se trouvent les Banques de développement régionales, la Banque des règlements internationaux, la Banque centrale européenne, le Fonds monétaire international, l'Organisation pour la coopération et le développement économiques, l'Organisation des nations unies, la Banque mondiale, etc. (De Santis, 2020). Outre les enquêtes périodiques des organismes statistiques, certaines études récentes sur les effets de la pandémie et des confinements, notamment les documents de travail du NBER aux États-Unis, mobilisent des données d'enquêtes spécialement administrées par les auteurs auprès de panels larges de consommateurs (Coibion et al, 2020) ou d'entreprises (Bartik et al, 2020).…”

The COVID-19 Economic Crisis in Mexico through the Lens of a Financial Conditions Index

“…In this regard, financial conditions indices are usually included in macroeconomic forecasting models (see, for example, Hatzius et al, 2010;Brave and Butters, 2011;Kliesen et al, 2012;Koop and Korobilis, 2014;Gaglianone and Areosa, 2017). In addition, studies exploring tail risks to economic growth using the Growth-at-Risk methodology find that the predictive power of financial conditions is stronger for risks to the downside than to the upside (see Adrian et al, 2018;Prasad et al, 2019;De Santis and Van der Veken, 2020;Wang and Li, 2021). This result suggests that there might be asymmetric effects of tightening and easing shocks to financial conditions on real activity.…”