“GDP at risk”

What is GDP at risk?

In this post Cecchetti and Schoenholtz explain the concept and measurement of GDP at risk and argue that it constitutes an important step forward towards developing a financial stability policy framework with measurable objectives, appropriate tools and dynamic models that can explain the relation between the two.

GDP at Risk
By: Steve Cecchetti and Kim Schoenholtz – Brandeis University, New York University

The quantile regression technique

In this paper, we argue that the entire distribution of GDP growth evolves over time, with the left tail of the distribution positively correlated with slack in financial conditions. We measure the vulnerability of GDP growth to downside risks as relative entropy of the unconditional relative to conditional predictive distribution, and show that growth vulnerability is correlated with financial conditions.

Vulnerable Growth
Authors: Tobias Adrian, Nina Boyarchenko, Domenico Giannone
From:Federal Reserve Bank of New York

An application

How Policy Makers Can Better Predict a Downturn – and Prepare
By: Claudio Raddatz, Jay Surti – IMF