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Vulnerable growth in the Euro Area: Measuring the financial conditions


  • Figueres, Juan Manuel
  • Jarociński, Marek


This paper examines which measures of financial conditions are informative about the tail risks to output growth in the euro area. The Composite Indicator of Systemic Stress (CISS) is more informative than indicators focusing on narrower segments of financial markets or their simple aggregation in the principal component. Conditionally on the CISS one can reproduce for the euro area the stylized facts known from the US, such as the strong negative correlation between conditional mean and conditional variance that generates stable upper quantiles and volatile lower quantiles of output growth. JEL Classification: C12, E37, E44

Suggested Citation

  • Figueres, Juan Manuel & Jarociński, Marek, 2020. "Vulnerable growth in the Euro Area: Measuring the financial conditions," Working Paper Series 2458, European Central Bank.
  • Handle: RePEc:ecb:ecbwps:20202458
    Note: 400529

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    References listed on IDEAS

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    8. repec:ecb:ecbwps:20111426 is not listed on IDEAS
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    2. Milan Szabo, 2020. "Growth-at-Risk: Bayesian Approach," Working Papers 2020/3, Czech National Bank.
    3. De Santis, Roberto A. & Van der Veken, Wouter, 2020. "Forecasting macroeconomic risk in real time: Great and Covid-19 Recessions," Working Paper Series 2436, European Central Bank.
    4. Angelini, Elena & Darracq Pariès, Matthieu & Zimic, Srečko & Damjanović, Milan, 2020. "ECB-BASIR: a primer on the macroeconomic implications of the Covid-19 pandemic," Working Paper Series 2431, European Central Bank.

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    More about this item


    downside risk; macro-financial linkages; quantile regression;

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • 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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