Discussion paper

DP13349 The Term Structure of Growth-at-Risk

Using panel quantile regressions, we show that the conditional distribution of GDP growth depends on financial conditions, with growth-at-risk (GaR)-defined as conditional growth at the lower 5th percentile-more responsive than the median or upper percentiles. The term structure of GaR features an intertemporal tradeoff: GaR is higher in the short run but lower in the medium run when initial financial conditions are loose relative to typical levels. This shift in the growth distribution generally is not incorporated when solving dynamic stochastic general equilibrium models with macrofinancial linkages, which suggests downside risks to GDP growth are systematically underestimated.


Adrian, T, N Liang and F Grinberg (2018), ‘DP13349 The Term Structure of Growth-at-Risk ‘, CEPR Discussion Paper No. 13349. CEPR Press, Paris & London. https://cepr.org/publications/dp13349