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Reassessing the dependence between economic growth and financial conditions since 1973

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  • Tony Chernis
  • Patrick J. Coe
  • Shaun P. Vahey

Abstract

Adrian, Boyarchenko and Giannone (2019, ABG) adapt Quantile Regression (QR) methods to examine the relationship between U.S. economic growth and financial conditions. We confirm their empirical findings, using their methodology and their pre-2016 sample. Mindful of the importance of the Covid-19 pandemic, we extend the sample to 2021:3 and find attenuation of the key estimated coefficients using ABG’s empirical methods. Given the pandemic observations, we provide robust QR analysis of dependence based on ranked data, and explain the relationship with extant copula modelling methods.

Suggested Citation

  • Tony Chernis & Patrick J. Coe & Shaun P. Vahey, 2022. "Reassessing the dependence between economic growth and financial conditions since 1973," CAMA Working Papers 2022-30, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:camaaa:2022-30
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    File URL: https://cama.crawford.anu.edu.au/sites/default/files/publication/cama_crawford_anu_edu_au/2022-04/30_2022_chernis_coe_vahey.pdf
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    References listed on IDEAS

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    1. Ozer Karagedikli & Shaun P. Vahey & Elizabeth C. Wakerly, 2019. "Improved methods for combining point forecasts for an asymmetrically distributed variable," CAMA Working Papers 2019-15, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    2. Lucrezia Reichlin & Giovanni Ricco & Thomas Hasenzagl, 2020. "Financial Variables as Predictors of Real Growth Vulnerability," Documents de Travail de l'OFCE 2020-06, Observatoire Francais des Conjonctures Economiques (OFCE).
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    4. Smith, Michael Stanley, 2015. "Copula modelling of dependence in multivariate time series," International Journal of Forecasting, Elsevier, vol. 31(3), pages 815-833.
    5. Mateo Velásquez‐Giraldo & Gustavo Canavire‐Bacarreza & Kim P. Huynh & David T. Jacho‐Chavez, 2018. "Flexible Estimation of Demand Systems: A Copula Approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 33(7), pages 1109-1116, November.
    6. Ryan Niladri Banerjee & Juan Contreras & Aaron Mehrotra & Fabrizio Zampolli, 2020. "Inflation at risk in advanced and emerging economies," BIS Working Papers 883, Bank for International Settlements.
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    Cited by:

    1. Paul Labonne & Leif Anders Thorsrud, 2023. "Risky news and credit market sentiment," Working Papers No 14/2023, Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School.
    2. Aaron Amburgey & Michael W. McCracken, 2023. "Growth-at-Risk is Investment-at-Risk," Working Papers 2023-020, Federal Reserve Bank of St. Louis.

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    Keywords

    Vulnerable Growth; Quantile Regression; Copula Modelling;
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