Systemic risk measures and distribution forecasting of macroeconomic shocks

In this paper, we study the role of systemic risk in predictions of macroeconomic shocks in four major countries, namely the United States, Japan, South Korea, and China. We propose a three-step procedure to depict the entire distributions of macroeconomic shocks. Individual systemic risk measures significantly improve the out-of-sample predictions, but the prediction power of them varies with countries. Meanwhile, the combination of individual forecasts can provide solid and prominent predictions across quantiles and countries. Recessions are associated with left-skewed distributions conditional on systemic risk, while the conditional distributions are closer to being symmetric in tranquil times.