Growth-at-Risk: A Framework for Assessing Economic Vulnerability

Authors: Wright A , Mounts C , Davis M* , Hield R and Branch S

DOI: 10.23880/jenr-16000417

Volume 9, Issue 4

Abstract

The Growth-at-Risk (GaR) model estimates the probability that Gross Domestic Product (GDP) growth will fall below a specified threshold. Using the Quantile Regression approach, four Caribbean economies—The Bahamas, Barbados, Jamaica, and Trinidad and Tobago—were assessed to determine the impact of growth falling below the 2.0% threshold. For the subsequent three periods, growth remained above 2.0% in most forecasts. Additionally, an analysis specific to The Bahamas estimated the probability of GDP growth falling below 2.0%. The model was extended to simulate shocks and scenarios, and to calculate their effects on the likelihood that growth falls below the threshold. The results showed that growth usually exceeded the threshold in the forecasted periods.

Keywords: Growth-At-Risk; Macrofinancial Linkages; Forecasting; Probability

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