Financial Conditions and Macroeconomic Downside Risks in the Euro Area
Stéphane Lhuissier
Working papers from Banque de France
Abstract:
Motivated by empirically characterizing the relationship between financial conditions and downside macroeconomic risks in the euro area, I develop a regime-switching skew-normal model with time-varying probabilities of transitions. Using Bayesian methods, the model estimates show that a strong cyclical pattern emerges from the conditional skewness (a measure of the asymmetry of the predictive distribution), which has a tendency to rapidly decline to negative territory prior and during recessions. However, the inclusion of financial-specific information in time-varying probabilities does not help to anticipate such skewness nor more generally to provide advance warnings of tail risks.
Keywords: Financial Conditions; Downside Risks; Predictability; Regime-Switching Models (search for similar items in EconPapers)
JEL-codes: C11 C2 E32 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2022
New Economics Papers: this item is included in nep-cwa, nep-ecm, nep-eec, nep-fdg, nep-his, nep-mac, nep-ore and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)
Downloads: (external link)
https://publications.banque-france.fr/sites/defaul ... /documents/wp863.pdf
Related works:
Journal Article: Financial conditions and macroeconomic downside risks in the euro area (2022)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:863
Access Statistics for this paper
More papers in Working papers from Banque de France Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS. Contact information at EDIRC.
Bibliographic data for series maintained by Michael brassart (labolog@banque-france.fr).