“High-frequency macroeconomic risk measures in the wake of the war in Ukraine”

In a VoxEU post by Laurent Ferrara, Matteo Mogliani, and Jean-Guillaume Sahuc today, applying a growth-at-risk (GaR) approach (Ferrara et al. 2022, ungated 2020 WP version) they estimate they downside risk to Euro area vs. US GDP q/q growth.

Using the Composite Indicator of Systemic Stress (CISS), developed by the ECB (Holló et al. 2012), they find:

We observe that within a few days, the probability density function of conditional euro area GDP growth for 2022q1 clearly shifted to the left. The value estimated on 28 March shows a thicker left tail, highlighting an increase in downward macro risks in the wake of the start of the war in Ukraine. As regards the value of the GaR at 10%, which can be considered as the 10% quantile of this estimated conditional distribution, it went from -0.02% on 01 February to -0.90% on 28 March.

This is shown in Figure 2 from Ferrara et al.

Source: Figure 2 from Ferrara et al (VoxEU, 2022).

For the US, the shift  is less marked than for the euro area: the GaR (10%) goes from 0.30% on 1 February to 0.03% —  hence the GaR (10%) lost only about 0.30 percentage points.

Source: Figure 3 from Ferrara et al (VoxEU 2022).