IMF paper sets out growth-at-risk framework

The International Monetary Fund has published a paper detailing its “growth-at-risk” framework for assessing how financial risks could impact future growth.

In the working paper, a team of researchers explains how to conduct GAR analysis, and outlines an Excel-based GAR tool designed to support IMF surveillance.

GAR “links macrofinancial conditions to the probability distribution of future real GDP growth”, the authors say.

The measure has several advantages, they add. It “draws attention” to the entire growth distribution, rather than the “more traditional point forecasts”, it sheds light on the relative importance of key drivers of GDP growth, and it helps quantify the impact of systemic risk on future growth.

Thinking about growth in this way could allow for a more nuanced approach to policy, the authors say. Rather than policy-makers taking decisions solely on the basis of the central scenario in the forecast, they may choose instead to minimise risks based on the entire growth distribution.

IMF teams recently started using GAR analysis as part of Article IV surveillance, and the fund’s global financial stability report also draws on the measure.

The IMF is currently reviewing its approach to both macroeconomic and financial surveillance.