## The Term Structure of Growth-at-Risk

_IMF Working Papers, August 2, 2018_

## Source details

**Canonical URL:** [The Term Structure of Growth-at-Risk](https://www.imf.org/en/publications/wp/issues/2018/08/02/the-term-structure-of-growth-at-risk-46150)

## Other formats

- [Markdown version](/en/publications/wp/issues/2018/08/02/the-term-structure-of-growth-at-risk-46150/index.md)
- [Structured JSON version](/en/publications/wp/issues/2018/08/02/the-term-structure-of-growth-at-risk-46150/index.json)
- [Bundle manifest](/en/publications/wp/issues/2018/08/02/the-term-structure-of-growth-at-risk-46150/bundle-manifest.json)

## Bibliographic details
- Authors: Tobias Adrian, Federico Grinberg, Nellie Liang, Sheheryar Malik
- Published: August 2, 2018
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484372364.001

---

### Overview and research question
- Using panel quantile regressions for 11 advanced and 10 emerging market economies, the paper examines how the conditional distribution of GDP growth depends on financial conditions.
- Growth-at-risk (GaR) is defined as growth at the lower 5th percentile.
- The analysis focuses on the term structure of GaR and how initial financial conditions and credit booms affect short- and medium-run downside risks to GDP growth.

### Methodology
- Empirical approach: panel quantile regressions.
- Sample: 11 advanced and 10 emerging market economies.
- Key comparison: responsiveness of lower-tail (5th percentile) conditional GDP growth relative to the median and upper percentiles.

### Key findings
- Growth-at-risk (GaR) is more responsive to financial conditions than the median or upper percentiles.
- The term structure of GaR features an intertemporal tradeoff:
  - GaR is higher in the short run;
  - GaR is lower in the medium run when initial financial conditions are loose relative to typical levels.
- The intertemporal tradeoff is amplified by a credit boom.
- Dynamic stochastic general equilibrium models with macrofinancial linkages generally do not incorporate this shift in the growth distribution, which suggests downside risks to GDP growth are systematically underestimated.

### Implications for policy and modeling
- Financial conditions and credit booms materially affect the distribution of future GDP growth, especially downside risks captured by GaR.
- Risk assessments and policy frameworks that rely on models omitting this shift in the growth distribution may understate downside risks to GDP growth.
- Incorporating distributional shifts (particularly the term structure of GaR) into macrofinancial models could improve recognition of medium-run vulnerabilities following periods of loose financial conditions and credit expansion.

---

## Content in this bundle

- **The Term Structure of Growth-at-Risk, WP/18/180, August 2018**
  - [The Term Structure of Growth-at-Risk, WP/18/180, August 2018 (Markdown version)](/-/media/files/publications/wp/2018/wp18180.pdf.md){rel="alternate" type="text/markdown"}
  - [The Term Structure of Growth-at-Risk, WP/18/180, August 2018 (PDF)](/-/media/files/publications/wp/2018/wp18180.pdf){rel="external" type="application/pdf"}

---

_Source: https://www.imf.org/en/publications/wp/issues/2018/08/02/the-term-structure-of-growth-at-risk-46150_