Abstract
We contribute to the rapidly emerging growth-at-risk literature by examining the impact of financial stress and credit growth on the term structure of growth-at-risk in the U.S. over the past 130 years. While financial stress has become less relevant for downside risks over time, the impact of credit growth has increased substantially. We find that although credit growth has increasingly reduced growth risks over shorter horizons, medium-run risks associated with credit growth have increased. These results point to an important policy trade-off, as the implementation of policies addressing elevated levels of financial stress may involve an increase in leverage and credit growth, which, in turn, is associated with higher risks in the medium term.
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