The Term Structure of Growth-at-Risk

The Term Structure of Growth-at-Risk
Author: Tobias Adrian
Publisher: International Monetary Fund
Total Pages: 40
Release: 2018-08-02
Genre: Business & Economics
ISBN: 1484372867

Using panel quantile regressions for 11 advanced and 10 emerging market economies, we show that the conditional distribution of GDP growth depends on financial conditions, with growth-at-risk (GaR)—defined as growth at the lower 5th percentile—more responsive than the median or upper percentiles. In addition, the term structure of GaR features an intertemporal tradeoff: GaR is higher in the short run; but lower in the medium run when initial financial conditions are loose relative to typical levels, and the tradeoff is amplified by a credit boom. This shift in the growth distribution generally is not incorporated when solving dynamic stochastic general equilibrium models with macrofinancial linkages, which suggests downside risks to GDP growth are systematically underestimated.

Growth at Risk: Concept and Application in IMF Country Surveillance

Growth at Risk: Concept and Application in IMF Country Surveillance
Author: Mr.Ananthakrishnan Prasad
Publisher: International Monetary Fund
Total Pages: 39
Release: 2019-02-21
Genre: Business & Economics
ISBN: 1484397010

The growth-at-risk (GaR) framework links current macrofinancial conditions to the distribution of future growth. Its main strength is its ability to assess the entire distribution of future GDP growth (in contrast to point forecasts), quantify macrofinancial risks in terms of growth, and monitor the evolution of risks to economic activity over time. By using GaR analysis, policymakers can quantify the likelihood of risk scenarios, which would serve as a basis for preemptive action. This paper offers practical guidance on how to conduct GaR analysis and draws lessons from country case studies. It also discusses an Excel-based GaR tool developed to support the IMF’s bilateral surveillance efforts.

The Term Structure of Growth-at-Risk

The Term Structure of Growth-at-Risk
Author: Tobias Adrian
Publisher: International Monetary Fund
Total Pages: 40
Release: 2018-08-02
Genre: Business & Economics
ISBN: 1484372360

Using panel quantile regressions for 11 advanced and 10 emerging market economies, we show that the conditional distribution of GDP growth depends on financial conditions, with growth-at-risk (GaR)—defined as growth at the lower 5th percentile—more responsive than the median or upper percentiles. In addition, the term structure of GaR features an intertemporal tradeoff: GaR is higher in the short run; but lower in the medium run when initial financial conditions are loose relative to typical levels, and the tradeoff is amplified by a credit boom. This shift in the growth distribution generally is not incorporated when solving dynamic stochastic general equilibrium models with macrofinancial linkages, which suggests downside risks to GDP growth are systematically underestimated.

Zero Lower Bound Term Structure Modeling

Zero Lower Bound Term Structure Modeling
Author: L. Krippner
Publisher: Springer
Total Pages: 436
Release: 2015-01-05
Genre: Business & Economics
ISBN: 1137401826

Nominal yields on government debt in several countries have fallen very near their zero lower bound (ZLB), causing a liquidity trap and limiting the capacity to stimulate economic growth. This book provides a comprehensive reference to ZLB structure modeling in an applied setting.

Capital Flows at Risk: Taming the Ebbs and Flows

Capital Flows at Risk: Taming the Ebbs and Flows
Author: Mr.R. G Gelos
Publisher: International Monetary Fund
Total Pages: 44
Release: 2019-12-20
Genre: Business & Economics
ISBN: 1513522906

The volatility of capital flows to emerging markets continues to pose challenges to policymakers. In this paper, we propose a new framework to answer critical policy questions: What policies and policy frameworks are most effective in dampening sharp capital flow movements in response to global shocks? What are the near- versus medium-term trade-offs of different policies? We tackle these questions using a quantile regression framework to predict the entire future probability distribution of capital flows to emerging markets, based on current domestic structural characteristics, policies, and global financial conditions. This new approach allows policymakers to quantify capital flows risks and evaluate policy tools to mitigate them, thus building the foundation of a risk management framework for capital flows.

A Macroeconomic Approach to the Term Premium

A Macroeconomic Approach to the Term Premium
Author: Emanuel Kopp
Publisher: International Monetary Fund
Total Pages: 22
Release: 2018-06-15
Genre: Business & Economics
ISBN: 1484363671

In recent years, term premia have been very low and sometimes even negative. Now, with the United States economy growing above potential, inflationary pressures are on the rise. Term premia are very sensitive to the expected future path of growth, inflation, and monetary policy, and an inflation surprise could require monetary policy to tighten faster than anticipated, inducing to a sudden decompression of term and other risk premia, thus tightening financial conditions. This paper proposes a semi-structural dynamic term structure model augmented with macroeconomic factors to include cyclical dynamics with a focus on medium- to long-run forecasts. Our results clearly show that a macroeconomic approach is warranted: While term premium estimates are in line with those from other studies, we provide (i) plausible, stable estimates of expected long-term interest rates and (ii) forecasts of short- and long-term interest rates as well as cyclical macroeconomic variables that are stunningly close to those generated from large-scale macroeconomic models.

The Global Trade Slowdown

The Global Trade Slowdown
Author: Cristina Constantinescu
Publisher: International Monetary Fund
Total Pages: 44
Release: 2015-01-21
Genre: Business & Economics
ISBN: 1498399134

This paper focuses on the sluggish growth of world trade relative to income growth in recent years. The analysis uses an empirical strategy based on an error correction model to assess whether the global trade slowdown is structural or cyclical. An estimate of the relationship between trade and income in the past four decades reveals that the long-term trade elasticity rose sharply in the 1990s, but declined significantly in the 2000s even before the global financial crisis. These results suggest that trade is growing slowly not only because of slow growth of Gross Domestic Product (GDP), but also because of a structural change in the trade-GDP relationship in recent years. The available evidence suggests that the explanation may lie in the slowing pace of international vertical specialization rather than increasing protection or the changing composition of trade and GDP.

Financial Markets and the Real Economy

Financial Markets and the Real Economy
Author: John H. Cochrane
Publisher: Now Publishers Inc
Total Pages: 117
Release: 2005
Genre: Business & Economics
ISBN: 1933019158

Financial Markets and the Real Economy reviews the current academic literature on the macroeconomics of finance.