Systemic Risks and the Macroeconomy

By Gianni De Nicolò, M. Lucchetta. Social Science Research Network, 2010

110 citations recorded by the source corpus.

This paper presents a modeling framework that delivers joint forecasts of indicators of systemic real risk and systemic financial risk, as well as stress-tests of these indicators as impulse responses to structural shocks identified by standard macroeconomic and banking theory. This framework is implemented using large sets of quarterly time series of indicators of financial and real activity for the G-7 economies for the 1980Q1-2009Q3 period. We obtain two main results. First, there is evidence of out-of sample forecasting power for tail risk realizations of real activity for several countries, suggesting the usefulness of the model as a risk monitoring tool. Second, in all countries aggregate demand shocks are the main drivers of the real cycle, and bank credit demand shocks are the main drivers of the bank lending cycle. These results challenge the common wisdom that constraints in the aggregate supply of credit have been a key driver of the sharp downturn in real activity experienced by the G-7 economies in 2008Q4-2009Q1.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/e6bd613a2fdb27f088354cd276839e45c3834f35

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Citations in the corpus

Systemic Risk in Europe (2013, unknown): “More generally, the interactions between real shocks and systemic risk have been put forward by De Nicolò and Lucchetta (2011, 2012) from a macroeconomic perspective.”
Where the Risks Lie: A Survey on Systemic Risk (2017, background): “De Nicoló and Lucchetta (2011) study the joint dynamic of a systemic real risk indicator (defined as the VaR of the GDP) and a system financial risk measure (defined as the VaR of the return of a large portfolio of financial firms) with a factoraugmented vector autoregressive model. They show that t”
Measuring systemic risk in the European banking sector: a copula CoVaR approach (2017, background): “Alternatively, Nicolò and Lucchetta (2011) use a dynamic factor model on quarterly time-series sets of indicators of financial and real activity for the G-7 economies and obtain joint forecasts and stress-tests of indicators of systemic real risk and systemic financial risk.”
The Effects of Bank Capital on Lending: What Do We Know, and What Does It Mean? (2012, unknown): “[12] De Nicolò G.”