Economics in central banking: Tobias Adrian, Nina Boyarchenko and Domenico Giannone’s growth-at-risk framework

The economists’ work on growth-at-risk has unlocked a host of options for risk-based policy-making

Economics-montage
From left: Tobias Adrian, Nina Boyarchenko and Domenico Giannone
Adrian Petty/ECB, Domenico Giannone, IMF Photo/Kim Haughton @CentralBanking montage

Central banks spend a lot of time and resources thinking about the most likely outcomes for key macroeconomic variables, notably growth and inflation. But some of the biggest moves in these variables happen not when the most likely scenario plays out, but when something goes suddenly and unexpectedly wrong. During the past few years, a growing movement towards risk-based policy-making has sought to cut the likelihood of these severe outcomes, which occur in the ‘tail’ of probability

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