Abstract
The Growth-at-Risk (GaR) measure for financial stability indicates how severe a recession could become in an extreme situation where future output growth falls into the 5th percentile of the distribution. In this letter, we estimate the effects of macroprudential policies on GaR by combining quantile regressions with local projections in a panel data setting. Our results indicate that the effect of macroprudential measures on GaR could be significant in the medium term. Tightening the loan-to-value limit narrows the whole GDP distribution, while doing the same to loan-loss provisions just moves the left tail of the distribution upward, reducing only the intensity of a potential crisis.
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