{"title":"Foreign Vulnerabilities, Domestic Risks: The Global Drivers of GDP-at-Risk","authors":"Simon Lloyd, Ed Manuel, Konstantin Panchev","doi":"10.1057/s41308-023-00199-7","DOIUrl":null,"url":null,"abstract":"We study how foreign financial developments influence the conditional distribution of domestic GDP growth. We propose a method to account for foreign vulnerabilities using bilateral-exposure weights when assessing downside macroeconomic risks within quantile regressions. For an advanced-economy panel, we show that tighter foreign financial conditions and faster foreign credit-to-GDP growth are associated with a more severe left-tail of domestic GDP growth, even controlling for domestic indicators. Incorporating foreign variables improves estimates of domestic GDP-at-Risk, both in and out of sample. Decomposing GDP-at-Risk into domestic and foreign origins, we show that foreign shocks are a key driver of domestic macroeconomic tail risks.","PeriodicalId":47177,"journal":{"name":"Imf Economic Review","volume":"18 1","pages":"0"},"PeriodicalIF":3.3000,"publicationDate":"2023-02-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Imf Economic Review","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.1057/s41308-023-00199-7","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
We study how foreign financial developments influence the conditional distribution of domestic GDP growth. We propose a method to account for foreign vulnerabilities using bilateral-exposure weights when assessing downside macroeconomic risks within quantile regressions. For an advanced-economy panel, we show that tighter foreign financial conditions and faster foreign credit-to-GDP growth are associated with a more severe left-tail of domestic GDP growth, even controlling for domestic indicators. Incorporating foreign variables improves estimates of domestic GDP-at-Risk, both in and out of sample. Decomposing GDP-at-Risk into domestic and foreign origins, we show that foreign shocks are a key driver of domestic macroeconomic tail risks.
期刊介绍：
The IMF Economic Review is the official research journal of the International Monetary Fund (IMF). It is dedicated to publishing peer-reviewed, high-quality, context-related academic research on open-economy macroeconomics. It emphasizes rigorous analysis with an empirical orientation that is of interest to a broad audience, including academics and policymakers. Studies that borrow from, and interact with, other fields such as finance, international trade, political economy, labor, economic history or development are also welcome.
The views presented in published papers are those of the authors and should not be attributed to, or reported as, reflecting the position of the IMF, its Executive Board, or any other organization mentioned herein.
Comments
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