Skewed SVARs: tracking the structural sources of macroeconomic tail risks

Carlos Montes-Galdón () and Eva Ortega
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Carlos Montes-Galdón: European Central Bank

No 2208, Working Papers from Banco de España

Abstract: This paper proposes a vector autoregressive model with structural shocks (SVAR) that are identified using sign restrictions and whose distribution is subject to time-varying skewness. It also presents an efficient Bayesian algorithm to estimate the model. The model allows for the joint tracking of asymmetric risks to macroeconomic variables included in the SVAR. It also provides a narrative about the structural reasons for the changes over time in those risks. Using euro area data, our estimation suggests that there has been a significant variation in the skewness of demand, supply and monetary policy shocks between 1999 and 2019. This variation lies behind a significant proportion of the joint dynamics of real GDP growth and inflation in the euro area over this period, and also generates important asymmetric tail risks in these macroeconomic variables. Finally, compared to the literature on growth- and inflation-at-risk, we found that financial stress indicators do not suffice to explain all the macroeconomic tail risks.

Keywords: Bayesian SVAR; skewness; growth-at-risk; inflation-at-risk (search for similar items in EconPapers)
JEL-codes: C11 C32 C51 E31 E32 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2022-03
New Economics Papers: this item is included in nep-cba, nep-ecm, nep-eec, nep-ets, nep-fdg and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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https://www.bde.es/f/webbde/SES/Secciones/Publicac ... 22/Files/dt2208e.pdf First version, March 2022 (application/pdf)

Related works:
Chapter: Skewed SVARs: Tracking the Structural Sources of Macroeconomic Tail Risks (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:2208

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