Working Paper Revision
Growth-at-Risk is Investment-at-Risk
Abstract: We investigate the role financial conditions play in the composition of U.S. growth-at-risk. We document that, by a wide margin, growth-at-risk is investment-at-risk. That is, if financial conditions indicate U.S. real GDP growth will be in the lower tail of its conditional distribution, we know that the main contributor is a decline in investment. Consumption contributes under extreme financial stress. Government spending and net exports do not play a role. We show that leverage plays a key role in determining both consumption- and investment-at-risk, which provides support to the financial accelerator mechanism proposed by Bernanke et al. (1999).
Keywords: growth-at-risk; real-time data; quantiles; expected shortfall;
JEL Classification: C12; C32; C38; C52;
https://doi.org/10.20955/wp.2023.020
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Provider: Federal Reserve Bank of St. Louis
Part of Series: Working Papers
Publication Date: 2024-08-16
Number: 2023-020
Related Works
- Working Paper Revision (2024-08-16) : You are here.
- Working Paper Original (2023-08-21) : Growth-at-Risk is Investment-at-Risk