Forecasting Macroeconomic Risks

Tobias Adrian, Patrick Adams, Nina Boyarchenko and Domenico Giannone

No 14436, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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.

Date: 2020-02
New Economics Papers: this item is included in nep-for, nep-mac and nep-rmg
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Related works:
Journal Article: Forecasting macroeconomic risks (2021)
Working Paper: Forecasting Macroeconomic Risks (2020)
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