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Vulnerable Growth: A Revisit

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  • Nam Gang Lee

    (Economic Research Institute, Bank of Korea)

Abstract

This paper studies the distributional linkages between future economic performance and current conditions by means of a flexible quantile regression method. The examination of the linkages suggests that the conditional quantiles are nonlinear, which offers a new perspective on the conditional distribution. The nonlinearity causes countercyclical volatility to break down in both the right and left tails, the breakdown being associated with positive skewness in the short-term. As a corollary, in periods of recessions accompanied by a financial crisis, downside risks inherent in the distribution are smaller than we would think otherwise based on linear quantile regression.

Suggested Citation

  • Nam Gang Lee, 2020. "Vulnerable Growth: A Revisit," Working Papers 2020-22, Economic Research Institute, Bank of Korea.
    • Handle: RePEc:bok:wpaper:2022
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    References listed on IDEAS

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    More about this item

    Keywords

    D-vine Quantile Regression; Conditional Quantiles; Nonlinearity; Downside Risk;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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