Assessing Asymmetric Macroeconomic Risk

Stéphane Lhuissier

Working papers from Banque de France

Abstract: I propose a dynamic factor model with time-varying skewness to assess asymmetric risk around the economic outlook across a set of macroeconomic aggregates. Applied to U.S. data, the model shows that macroeconomic skewness is procyclical, displays significant independent variations from GDP growth skewness, and does not require conditioning on financial variables to manifest. Compared to univariate benchmarks, the model improves the detection of downside risk to growth and delivers more accurate predictive distributions, especially during downturns. These findings underscore the value of using a richer information set to quantify the balance of macroeconomic risks.

Keywords: Dynamic Factor Models; Markov-Switching; Skewness (search for similar items in EconPapers)
JEL-codes: C34 C38 C53 E37 (search for similar items in EconPapers)
Pages: 77 pages
Date: 2025
New Economics Papers: this item is included in nep-ets and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:1004

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