Credit, capital and crises: a GDP-at-Risk approach

Hacıoğlu Hoke, Sinem, David Aikman, Jonathan Bridges (), Cian O'Neill and Akash Raja
Authors registered in the RePEc Author Service: Sinem Hacıoğlu Hoke

No 15864, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Using quantile regressions applied to a panel dataset of 16 advanced economies, we examine how downside risk to growth over the medium term is affected by a set of macroprudential indicators. We find that credit and property price booms, and wide current account deficits increase downside risks 3 to 5 years ahead. However, such downside risks can be partially mitigated by increasing the capital ratio of the banking system. We show that GDP-at-Risk, defined as the the 5th quantile of the projected GDP growth distribution three years ahead, deteriorated in the US in the run-up to the Global Financial Crisis, driven by rapid growth in credit and house prices alongside a widening current account deficit. Our results suggest such indicators could provide useful information for the stance of macroprudential policy.

Keywords: Financial stability; Gdp-at-risk; Macroprudential policy; Quantile regressions; Local projections (search for similar items in EconPapers)
JEL-codes: G01 G18 G21 (search for similar items in EconPapers)
Date: 2021-03
New Economics Papers: this item is included in nep-ban, nep-cba, nep-fdg and nep-rmg
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Citations: View citations in EconPapers (18)

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Working Paper: Credit, capital and crises: a GDP-at-Risk approach (2019)
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