Working Paper

Growth-at-Risk is Investment-at-Risk

Abstract: We investigate the role financial conditions play in the composition of U.S. growth-at-risk. We document that, by a wide margin, growth-at-risk is investment-at-risk. That is, if financial conditions indicate U.S. real GDP growth will be in the lower tail of its conditional distribution, we know that the main contributor is a decline in investment. Consumption contributes under extreme financial stress. Government spending and net exports do not play a role.

Keywords: growth-at-risk; real-time data; quantiles; expected shortfall;

JEL Classification: C12; C32; C38; C52;

https://doi.org/10.20955/wp.2023.020

Bibliographic Information

Provider: Federal Reserve Bank of St. Louis

Part of Series: Working Papers

Publication Date: 2023-08-21

Number: 2023-020