Financial Conditions and 'Growth at Risk' in Italy

Piergiorgio Alessandri, Leonardo Del Vecchio and Arianna Miglietta ()
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Arianna Miglietta: Bank of Italy

No 1242, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: This paper studies the relationship between financial conditions and economic activity in Italy using quantile regression techniques in the spirit of Adrian, Boryachenko and Giannone (2019). We exploit the volatility of the 2008-2012 period to assess the plausibility of ‘tail’ predictions obtained from a broad range of financial indicators. We find that, although spikes in financial distress are typically followed by economic contractions, using this relationship for out-of-sample forecasting is not trivial. To some extent, the models predict the slowdowns experienced by Italy after 2008, but the forecasts are volatile, their quality varies across indicators and horizons, and the predictions tend to overestimate the likelihood of an upcoming recession. As such, these tools represent a complement to, rather than a substitute for, an articulated and diversified systemic risk assessment framework.

Keywords: financial conditions; quantile regression; growth risk (search for similar items in EconPapers)
JEL-codes: C21 E37 (search for similar items in EconPapers)
Date: 2019-10
New Economics Papers: this item is included in nep-fdg, nep-mac and nep-rmg
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_1242_19

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