Financial Conditions and Macroeconomic Risk in Australia (with Michelle Wright, RBA)

Presented by Luke Hartigan, Reserve Bank of Australia

Abstract

We develop a Financial Conditions Index (FCI) for Australia. We find it correlates very closely with previous episodes of financial instability in Australia and appears to have some leading properties for standard measures of economic activity. We use this FCI to develop a Growth-at-Risk framework for Australia. This allows us to examine the impact of current financial conditions on future downside risk to macroeconomic variables and provides a potential way of quantifying financial stability risks. We find that financial conditions play an important role in explaining downside risk to GDP, consumption, and employment but the evidence is less compelling for business investment and the unemployment rate.

About the presenter’s visit

Luke Hartigan will be visiting the School of Economics on 10 December 2019.  While here he will be using room 520A Colin Clark Building.  If you would like to meet with him or have lunch or dinner with him please contact A/Prof Valentin Zelenyuk who will be his host while at The University of Queensland.  A/Prof Zelenyuk be contacted on v.zelenyuk@uq.edu.au.