Growth-at-Risk is Investment-at-Risk

Aaron Amburgey and Michael McCracken

No 2023-020, Working Papers from Federal Reserve Bank of St. Louis

Abstract: We investigate the role financial conditions play in the composition of U.S. growth-at-risk. We document that, by a wide margin, growth-at-risk is investment-at-risk. That is, if financial conditions indicate U.S. real GDP growth will be in the lower tail of its conditional distribution, we know that the main contributor is a decline in investment. Consumption contributes under extreme financial stress. Government spending and net exports do not play a role. We show that leverage plays a key role in determining both consumption- and investment-at-risk, which provides support to the financial accelerator mechanism proposed by Bernanke et al. (1999).

Keywords: growth-at-risk; real-time data; quantiles; expected shortfall (search for similar items in EconPapers)
JEL-codes: C12 C32 C38 C52 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2023-08-21, Revised 2024-08-16
New Economics Papers: this item is included in nep-cfn, nep-fdg and nep-rmg
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedlwp:96594

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DOI: 10.20955/wp.2023.020

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