Forecasting macroeconomic risks

Patrick A. Adams, Tobias Adrian, Nina Boyarchenko and Domenico Giannone

International Journal of Forecasting, 2021, vol. 37, issue 3, 1173-1191

Abstract: We construct risks around consensus forecasts of real GDP growth, unemployment, and inflation. We find that risks are time-varying, asymmetric, and partly predictable. Tight financial conditions forecast downside growth risk, upside unemployment risk, and increased uncertainty around the inflation forecast. Growth vulnerability arises as the conditional mean and conditional variance of GDP growth are negatively correlated: downside risks are driven by lower mean and higher variance when financial conditions tighten. Similarly, employment vulnerability arises as the conditional mean and conditional variance of unemployment are positively correlated, with tighter financial conditions corresponding to higher forecasted unemployment and higher variance around the consensus forecast.

Keywords: Downside risk; Growth vulnerability; Shortfall; Quantile regressions; Density forecast; Financial conditions (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (31)

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Related works:
Working Paper: Forecasting Macroeconomic Risks (2020)
Working Paper: Forecasting Macroeconomic Risks (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfor:v:37:y:2021:i:3:p:1173-1191

DOI: 10.1016/j.ijforecast.2021.01.003

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