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Growth at Risk: Forecast Distribution of GDP Growth in Israel

Author

Listed:
  • Michael Gurkov

    (Bank of Israel)

  • Osnat Zohar

    (Bank of Israel)

Abstract

We estimate the distribution of future GDP growth given current financial and macroeconomic conditions. The distribution is generally symmetric, indicating that upside and downside risks are balanced. Its dispersion, which captures forecast uncertainty, rises when the median forecast decreases. The model allows us to study the connection between financial variables and GDP growth. We find that accommodative financial conditions, either in the local or the global economy, contribute to downside risks to growth within three years.

Suggested Citation

  • Michael Gurkov & Osnat Zohar, 2022. "Growth at Risk: Forecast Distribution of GDP Growth in Israel," Bank of Israel Working Papers 2022.08, Bank of Israel.
    • Handle: RePEc:boi:wpaper:2022.08
    as

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    References listed on IDEAS

    as
    1. Markus K. Brunnermeier & Yuliy Sannikov, 2014. "A Macroeconomic Model with a Financial Sector," American Economic Review, American Economic Association, vol. 104(2), pages 379-421, February.
    2. Claudio Borio, 2014. "The financial cycle and macroeconomics: what have we learned and what are the policy implications?," Chapters, in: Ewald Nowotny & Doris Ritzberger-Grünwald & Peter Backé (ed.), Financial Cycles and the Real Economy, chapter 2, pages 10-35, Edward Elgar Publishing.
    3. Victor Chernozhukov & Iv·n Fern·ndez-Val & Alfred Galichon, 2010. "Quantile and Probability Curves Without Crossing," Econometrica, Econometric Society, vol. 78(3), pages 1093-1125, May.
    4. Atif Mian & Amir Sufi & Emil Verner, 2017. "Household Debt and Business Cycles Worldwide," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 132(4), pages 1755-1817.
    5. repec:hal:spmain:info:hdl:2441/5rkqqmvrn4tl22s9mc4b6ga2g is not listed on IDEAS
    6. repec:hal:wpspec:info:hdl:2441/5rkqqmvrn4tl22s9mc4b6ga2g is not listed on IDEAS
    7. Borio, Claudio, 2014. "The financial cycle and macroeconomics: What have we learnt?," Journal of Banking & Finance, Elsevier, vol. 45(C), pages 182-198.
    8. Claessens, Stijn & Kose, M. Ayhan & Terrones, Marco E., 2012. "How do business and financial cycles interact?," Journal of International Economics, Elsevier, vol. 87(1), pages 178-190.
    9. Mr. Ananthakrishnan Prasad & Mr. Selim A Elekdag & Mr. Phakawa Jeasakul & Romain Lafarguette & Mr. Adrian Alter & Alan Xiaochen Feng & Changchun Wang, 2019. "Growth at Risk: Concept and Application in IMF Country Surveillance," IMF Working Papers 2019/036, International Monetary Fund.
    10. Giglio, Stefano & Kelly, Bryan & Pruitt, Seth, 2016. "Systemic risk and the macroeconomy: An empirical evaluation," Journal of Financial Economics, Elsevier, vol. 119(3), pages 457-471.
    11. Victor Chernozhukov & Ivan Fernandez-Val & Alfred Galichon, 2007. "Quantile and probability curves without crossing," CeMMAP working papers CWP10/07, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Michael Gurkov & Osnat Zohar, 2022. "Inflation Risks in Israel," Bank of Israel Working Papers 2022.19, Bank of Israel.

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    More about this item

    Keywords

    downside risks; macro-financial linkages; volatility paradox;
    All these keywords.

    JEL classification:

    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - 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
    • G1 - Financial Economics - - General Financial Markets

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