IMF Working Papers Volume 2020 Issue 064: Model-Based Globally-Consistent Risk Assessment (2020)

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Model-Based Globally-Consistent Risk Assessment

Author:

Michal Andrle

Michal Andrlenull

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Mr. Benjamin L Hunt

Mr. Benjamin L Hunt
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Series:: IMF Working Papers

Volume/Issue:: Volume 2020: Issue 064

Language:: English

Publication Date:: 22 May 2020

DOI:: https://doi.org/10.5089/9781513536460.001

ISBN:: 9781513536460

ISSN:: 1018-5941

Pages:: 28

Keywords:: WP; distribution; shock distribution; monetary policy; normal distribution; DSGE models; predictive density; nonlinear; non-Gaussian; skew; fat tails; predictive distribution; distribution change; DSGE model; model dynamics; fiscal policy rule; output growth distribution; economic policy; risk assessment; growth distribution; output distribution; distribution of shock; Interest rate floor; Production growth; Zero lower bound; Global; headline inflation

Legal-disclaimer:: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Series:: IMF Working Papers

Volume/Issue:: Volume 2020: Issue 064

Language:: English

Publication Date:: 22 May 2020

DOI:: https://doi.org/10.5089/9781513536460.001

ISBN:: 9781513536460

ISSN:: 1018-5941

Pages:: 28

Keywords:: WP; distribution; shock distribution; monetary policy; normal distribution; DSGE models; predictive density; nonlinear; non-Gaussian; skew; fat tails; predictive distribution; distribution change; DSGE model; model dynamics; fiscal policy rule; output growth distribution; economic policy; risk assessment; growth distribution; output distribution; distribution of shock; Interest rate floor; Production growth; Zero lower bound; Global; headline inflation

Legal-disclaimer:: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

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This paper outlines an approach to assess uncertainty around a forecast baseline as well as the impact of alternative policy rules on macro variability. The approach allows for non-Gaussian shock distributions and non-linear underlying macroeconomic models. Consequently, the resulting distributions for macroeconomic variables can exhibit skewness and fat tails. Several applications are presented that illustrate the practical implementation of the technique including confidence bands around a baseline forecast, the probabilities of global growth falling below a specified threshold, and the impact of alternative fiscal policy reactions functions on macro variability.

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IMF Working Papers

ISSN:: 1018-5941

Publisher:: International Monetary Fund

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