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Systemic Risks and the Macroeconomy, Marcella Lucchetta, Gianni De Nicolo

Abstract
This paper presents a modeling framework that delivers joint forecasts of indicators of systemic real risk and systemic financial risk, as well as stress-tests of these indicators as impulse responses to structural shocks identified by standard macroeconomic and banking theory. This framework is implemented using large sets of quarterly time series of indicators of financial and real activity for the G-7 economies for the 1980Q1-2009Q3 period. We obtain two main results. First, there is evidence of out-of sample forecasting power for tail risk realizations of real activity for several countries, suggesting the usefulness of the model as a risk monitoring tool. Second, in all countries aggregate demand shocks are the main drivers of the real cycle, and bank credit demand shocks are the main drivers of the bank lending cycle. These results challenge the common wisdom that constraints in the aggregate supply of credit have been a key driver of the sharp downturn in real activity experienced by the G-7 economies in 2008Q4- 2009Q1
Table Of Contents
Contents; I. Introduction; II. Systemic risks; A. Definitions; B. Measurement; III. A Dynamic Factor Model of Systemic Risks; A. Systemic Risk Measures; B. Measures of Systemic Risk Spillovers; IV. Estimation and Forecasting; V. Identification and Stress Tests; A. Orthogonalization; B. Theory-based Identification; VI. Implementation; A. Descriptive Statistics; B. Estimation and Forecasting; C. Identification of Structural Shocks; VII. Conclusion; Tables; 1. Descriptive Statistics of Real GDP Growth (GDPG) and the System-wideFinancial Risk Indicator (FS)
Language
eng
Literary Form
non fiction
Note
Description based upon print version of record
Physical Description
1 online resource (42 p.)
Specific Material Designation
remote
Form Of Item
online
Isbn
9786612845369

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