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Kicking the can down the road: A historical growth-at-risk perspective

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  • Gächter, Martin
  • Hasler, Elias
  • Scharler, Johann

Abstract

We contribute to the rapidly emerging growth-at-risk literature by examining the impact of financial stress and credit growth on the term structure of growth-at-risk in the U.S. over the past 130 years. While financial stress has become less relevant for downside risks over time, the impact of credit growth has increased substantially. We find that although credit growth has increasingly reduced growth risks over shorter horizons, medium-run risks associated with credit growth have increased. These results point to an important policy trade-off, as the implementation of policies addressing elevated levels of financial stress may involve an increase in leverage and credit growth, which, in turn, is associated with higher risks in the medium term.

Suggested Citation

  • Gächter, Martin & Hasler, Elias & Scharler, Johann, 2023. "Kicking the can down the road: A historical growth-at-risk perspective," Economics Letters, Elsevier, vol. 228(C).
    • Handle: RePEc:eee:ecolet:v:228:y:2023:i:c:s0165176523001581
    DOI: 10.1016/j.econlet.2023.111133
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    References listed on IDEAS

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    More about this item

    Keywords

    Growth-at-risk; Vulnerable growth; Macroprudential policy;
    All these keywords.

    JEL classification:

    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • G01 - Financial Economics - - General - - - Financial Crises
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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