Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/246146 
Year of Publication: 
2020
Series/Report no.: 
Staff Memo No. 5/2020
Publisher: 
Norges Bank, Oslo
Abstract: 
We examine how measures of financial imbalances affect macroeconomic tail risks over the medium-term in Norway and in other advanced economies. We use a broad set of financial indicators to capture cyclical systemic risk in the financial system and different quantile regression models to characterise their effects on the medium-term growth distribution. We find that an increase in financial indicators is associated with both a more adverse prediction for growth-at-risk (5th percentile of growth distribution) and higher downside risks to growth (difference between the median and the 5th percentile of growth distribution). Among financial indicators, credit growth has the most significant effect on downside risks to growth. We also find that downside risks are higher under a fixed exchange rate regime. Using our estimates, we focus on two policy-relevant applications. First, we summarise how financial indicators and growth-at-risk have evolved over time in Norway and how this framework can be used to quantify and communicate risks to the economic outlook. Second, we show how this framework can be used to calibrate the severity of cyclical stress test scenarios.
Subjects: 
Financial stability
growth-at-risk
quantile regressions
JEL: 
E44
G01
G10
Persistent Identifier of the first edition: 
ISBN: 
978-82-8379-143-3
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Research Report
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