## Figure 3.5. Rising Leverage Signals Higher Downside Growth Risks at Longer Time Horizons

## Source details

**Canonical URL:** [Figure 3.5. Rising Leverage Signals Higher Downside Growth Risks at Longer Time Horizons](https://www.imf.org/-/media/files/publications/gfsr/2017/october/chapter-3/pdf-data/figure3-5.pdf)

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- [Markdown version](/-/media/files/publications/gfsr/2017/october/chapter-3/pdf-data/figure3-5.pdf.md)
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### Summary
- The figure reports coefficient estimates on the credit aggregates index from pooled quantile regressions of three-years-ahead GDP growth for advanced and emerging market economies.
- Coefficients are standardized by centering and reducing (zero mean, unit variance) both the dependent variable and the regressors.
- The coefficient estimate for a given quantile is the impact of a one standard deviation change in leverage on the future quantile of GDP growth, expressed in standard deviations.
- Vertical lines in the green bars denote confidence intervals at 10 percent; where they cross the x-axis, the regressor is not statistically significant.

### Panel 1 — Advanced Economies: Three Years Ahead
- Quantile axis labels as presented: 0.100.200.250.400.500.600.750.800.90
- Y-axis tick labels as presented: –0.4, –0.3, –0.2, –0.1, 0.0, 0.1, 0.2
- Interpretation points:
  - Rising leverage (one standard deviation increase) is associated with changes in future GDP growth quantiles measured in standard deviations.
  - Confidence intervals shown (vertical lines in green bars) indicate statistical significance at the 10 percent level where they do not cross the x-axis.

### Panel 2 — Emerging Market Economies: Three Years Ahead
- Quantile axis labels as presented: 0.100.200.250.400.500.600.750.800.90
- Y-axis tick labels as presented: –0.4, –0.3, –0.2, –0.1, 0.0, 0.1, 0.2
- Interpretation points:
  - As with advanced economies, a one standard deviation increase in leverage shifts the distribution of three-years-ahead GDP growth across quantiles, reported in standard deviations.
  - Statistical significance is indicated where confidence intervals do not cross the x-axis.

### Key methodological notes
- Data sources: Bloomberg Finance L.P.; Haver Analytics; IMF, Global Data Source and World Economic Outlook databases; Thomson Reuters Datastream; and IMF staff estimates.
- Regressions: pooled quantile regressions of three-years-ahead GDP growth.
- Standardization: both dependent variable and regressors are standardized (zero mean, unit variance) to enable comparison across quantiles, across time horizons, and between advanced and emerging market economies.
- Confidence intervals: vertical lines denote 10 percent confidence intervals; crossing the x-axis corresponds to absence of statistical significance.

*Sources: Bloomberg Finance L.P.; Haver Analytics; IMF, Global Data Source and World Economic Outlook databases; Thomson Reuters Datastream; and IMF staff estimates.*

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_Source: https://www.imf.org/-/media/files/publications/gfsr/2017/october/chapter-3/pdf-data/figure3-5.pdf_