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dc.contributor.authorLloyd, S.
dc.contributor.authorManuel, E.
dc.contributor.authorPanchev, K.
dc.date.accessioned2022-04-28T12:51:38Z
dc.date.available2022-04-28T12:51:38Z
dc.date.issued2021-08-02
dc.identifier.otherCWPE2156
dc.identifier.otherJIWP2102
dc.identifier.urihttps://www.repository.cam.ac.uk/handle/1810/336557
dc.description.abstractWe study how foreign financial developments influence the conditional distribution of domestic GDP growth. Within a quantile regression setup, we propose a method to parsimoniously account for foreign vulnerabilities using bilateral-exposure weights when assessing downside macroeconomic risks. Using a panel dataset of advanced economies, we show that tighter foreign financial conditions and faster foreign credit-to-GDP growth are associated with a more severe left tail of domestic GDP growth, even when controlling for domestic indicators. The inclusion of foreign indicators significantly improves estimates of ‘GDP-at-Risk’, a summary measure of downside risks. In turn, this yields time-varying estimates of higher moments of GDP growth that demonstrate interpretable moves over the cycle. Decomposing historical estimates of GDP-at-Risk into domestic and foreign sources, we show that foreign shocks are a key driver of domestic macroeconomic tail risks.
dc.publisherFaculty of Economics, University of Cambridge
dc.relation.ispartofseriesCambridge Working Papers in Economics
dc.relation.ispartofseriesJaneway Institute Working Paper Series
dc.rightsAll Rights Reserved
dc.rights.urihttps://www.rioxx.net/licenses/all-rights-reserved/
dc.subjectFinancial stability
dc.subjectGDP-at-Risk
dc.subjectInternational spillovers
dc.subjectLocal projections
dc.subjectQuantile regression
dc.subjectTail risk
dc.titleForeign Vulnerabilities, Domestic Risks: The Global Drivers of GDP-at-Risk
dc.typeWorking Paper
dc.identifier.doi10.17863/CAM.83978
datacite.isnewversionof.doi10.17863/CAM.74491


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