Discussion paper

DP15864 Credit, capital and crises: a GDP-at-Risk approach

Using quantile regressions applied to a panel dataset of 16 advanced economies, we examine how downside risk to growth over the medium term is affected by a set of macroprudential indicators. We find that credit and property price booms, and wide current account deficits increase downside risks 3 to 5 years ahead. However, such downside risks can be partially mitigated by increasing the capital ratio of the banking system. We show that GDP-at-Risk, defined as the the 5th quantile of the projected GDP growth distribution three years ahead, deteriorated in the US in the run-up to the Global Financial Crisis, driven by rapid growth in credit and house prices alongside a widening current account deficit. Our results suggest such indicators could provide useful information for the stance of macroprudential policy.


Aikman, D, J Bridges, S Hacıoğlu Hoke, C O'Neill and A Raja (2021), ‘DP15864 Credit, capital and crises: a GDP-at-Risk approach‘, CEPR Discussion Paper No. 15864. CEPR Press, Paris & London. https://cepr.org/publications/dp15864