Systemic Risks and the Macroeconomy
Chapter in NBER book Quantifying Systemic Risk (2013), Joseph G. Haubrich and Andrew W. Lo, editors (p. 113 - 148)
This chapter presents a modeling framework that forecasts both indicators of systemic real risk and systemic financial risk, as well as stress tests of these indicators as impulse responses to structurally identifiable shocks. The framework is implemented using a set of quarterly time series of financial and real activity for the G-7 economies for the 1980Q1 to 2009Q3 period. Two main results are obtained. First, there is evidence of out-of-sample forecasting power of the model for tail risk realizations of real activity for several countries, which suggests 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, while bank credit demand shocks are the main drivers of the bank lending cycle—a result consistent with the hypothesis that shocks to the real economy are the main drivers of both real and financial risks.
This paper was revised on August 29, 2014
Document Object Identifier (DOI): 10.7208/chicago/9780226921969.003.0005This chapter first appeared as NBER working paper w16998, Systemic Risks and the Macroeconomy, Gianni De Nicolò, Marcella Lucchetta
Commentary on this chapter: Comment, Hao Zhou
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