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Downside risk, financial conditions and systemic risk in China

Bo Wang and Haoran Li

Pacific-Basin Finance Journal, 2021, vol. 68, issue C

Abstract: Using quantile regression and Bayesian-VAR model, we demonstrate that deteriorating financial conditions and high systemic risk reinforce future downside risk when current GDP growth is relatively low in China. We construct the financial conditions indexes (FCIs) and find that there is a large difference between the forecasting ability of financial conditions and systemic risk to future GDP growth. The leading and early warning functions of systemic risks are better than that of financial conditions.

Keywords: Downside risk; Financial conditions; Systemic risk; Quantile regression; BVAR (search for similar items in EconPapers)
JEL-codes: E17 E32 E44 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:68:y:2021:i:c:s0927538x19304895

DOI: 10.1016/j.pacfin.2020.101356

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