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Systemic risk measures and distribution forecasting of macroeconomic shocks

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  • Chen, Guojin
  • Liu, Yanzhen
  • Zhang, Yu

Abstract

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.

Suggested Citation

  • Chen, Guojin & Liu, Yanzhen & Zhang, Yu, 2021. "Systemic risk measures and distribution forecasting of macroeconomic shocks," International Review of Economics & Finance, Elsevier, vol. 75(C), pages 178-196.
  • Handle: RePEc:eee:reveco:v:75:y:2021:i:c:p:178-196
    DOI: 10.1016/j.iref.2021.04.019
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    More about this item

    Keywords

    Systemic risk; Economic growth; Forecast; Quantile regression;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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