A1110
Title: Skewed SVARs: Tracking the structural sources of macroeconomic tail risks
Authors: Carlos Montes-Galdon - European Central Bank (Germany) [presenting]
Eva Ortega - Banco de Espana (Spain)
Abstract: A VAR model is proposed with structural shocks (SVAR) that are identified using sign restrictions, and whose distribution is subject to time-varying skewness. We also present an efficient Bayesian algorithm to estimate the model. The model allows tracking joint asymmetric risks to macroeconomic variables included in the SVAR, and provides a structural narrative to the evolution of those risks. When faced with euro area data, our estimation suggests that there has been a significant variation in the skewness of demand, supply and monetary policy shocks. Such variation can explain a significant proportion of the joint dynamics of real GDP growth and inflation, and also generates important asymmetric tail risks in those macroeconomic variables. Finally, compared to the literature on growth- and inflation-at-risk, we find that financial stress indicators are not enough to explain all the macroeconomic tail risks.
