Arbeitspapier
Forecasting Tail Risks
Reliable early warning signals are essential for timely implementation of macroeconomic and macro-prudential policies. This paper presents an early warning system as a set of multi-period forecasts of indicators of tail real and financial (systemic) risks. Forecasts are obtained from: (a) autoregressive and factor-augmented VARs with linear GARCH volatility (FAVARs), and (b) auto-regressive and factor-augmented Quantile Projections (QPs). We use a large database of monthly U.S. data for the period 1972:1-2014:12 to forecasts our tail risk indicators with each model in pseudo-real time. Our key finding is that forecasts obtained with autoregressive and FAVAR models significantly underestimate tail risks, while forecasts obtained with autoregressive and factor-augmented QPs deliver superior and fairly reliable early warning signals for tail real and financial risks up to a one-year horizon.
- Language
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Englisch
- Bibliographic citation
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Series: CESifo Working Paper ; No. 5286
- Classification
-
Wirtschaft
Econometric Modeling: General
Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data)
Financial Institutions and Services: General
- Subject
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tail risks
density forecasts
factor models
quantile projections
- Event
-
Geistige Schöpfung
- (who)
-
De Nicolò, Gianni
Lucchetta, Marcella
- Event
-
Veröffentlichung
- (who)
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Center for Economic Studies and ifo Institute (CESifo)
- (where)
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Munich
- (when)
-
2015
- Handle
- Last update
-
10.03.2025, 11:42 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- De Nicolò, Gianni
- Lucchetta, Marcella
- Center for Economic Studies and ifo Institute (CESifo)
Time of origin
- 2015
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