Growth at Risk and Uncertainty: Evidence from Mexico

Salgado Alfredo and Trujillo Alejandro

No 2023-08, Working Papers from Banco de México

Abstract: We analyze the relationship between uncertainty and economic growth expectations in Mexico through the Growth at Risk methodology. Our analysis consists of two stages: first, we estimate a quantile regression of annual output growth conditional on lagged values of a measure of macroeconomic uncertainty and other drivers. Second, based on the fitted values of the quantile regression, we estimate the parameters of a t-skewed distribution of expected economic growth. Our results show that an increase in macroeconomic uncertainty has a negative and statistically significant impact on the left tail of the growth distribution, leading to an increased probability of observing lower growth rates. These results remain robust to alternative measures of financial conditions, of economic policy uncertainty, and of risk exposure, as well as to alternative measurements of economic activity.

Keywords: Macroeconomic Uncertainty; Financial Conditions; Growth at Risk (search for similar items in EconPapers)
JEL-codes: C53 E23 E27 E32 O40 (search for similar items in EconPapers)
Date: 2023-09
New Economics Papers: this item is included in nep-ger, nep-gro and nep-rmg
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