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American Economic Review

ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)

Vulnerable Growth

  • Tobias Adrian
  • Nina Boyarchenko
  • Domenico Giannone
American Economic Review
vol. 109, no. 4, April 2019
(pp. 1263–89)
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Abstract

We study the conditional distribution of GDP growth as a function of economic and financial conditions. Deteriorating financial conditions are associated with an increase in the conditional volatility and a decline in the conditional mean of GDP growth, leading the lower quantiles of GDP growth to vary with financial conditions and the upper quantiles to be stable over time. Upside risks to GDP growth are low in most periods while downside risks increase as financial conditions become tighter. We argue that amplification mechanisms in the financial sector generate the observed growth vulnerability dynamics.

Citation

Adrian, Tobias, Nina Boyarchenko, and Domenico Giannone. 2019. "Vulnerable Growth." American Economic Review, 109 (4): 1263–89. DOI: 10.1257/aer.20161923

Additional Materials

JEL Classification

  • C53 Forecasting Models; Simulation Methods
  • E23 Macroeconomics: Production
  • E27 Macroeconomics: Consumption, Saving, Production, Employment, and Investment: Forecasting and Simulation: Models and Applications
  • E32 Business Fluctuations; Cycles
  • E44 Financial Markets and the Macroeconomy