Financial conditions, business cycle fluctuations and growth at risk

Arbeitspapier

We study the macroeconomic consequences of financial shocks and increase in economic risk using a quantile vector autoregression. Financial shocks have a negative, but asymmetric impact on the real economy: they substantially increase growth at risk, but have limited impact on upside potential. The impact of financial shocks is explained away after controlling for economic risk (measured by the interquantile range). The effects are economically relevant. Bad economic environment, characterized by negative real and financial shocks, has a highly skewed impact on business cycle fluctuations, leading to a peak reduction of monthly industrial production by more than 2%. In comparison, positive real and financial shocks in a good economic environment have limited effect on upside potential of the economy

Object Details

• ISBN: 978-92-899-4387-1
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ECB Working Paper ; No. 2470

Classification and Topics

• Classification: Wirtschaft ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models ; Forecasting Models; Simulation Methods ; Business Fluctuations; Cycles ; Financial Markets and the Macroeconomy
• Subject: Risk ; uncertainty ; financial conditions ; quantile regression

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Falconio, Andrea ; Manganelli, Simone
• Event: Veröffentlichung
• (who): European Central Bank (ECB)
• (where): Frankfurt a. M.
• (when): 2020

Further information

• DOI: doi:10.2866/891726
• Handle: http://hdl.handle.net/10419/229084
• Last update: 10.03.2025, 11:44 AM CET