Measuring China’s GaR with the threshold quantile regression model

We extend the growth at risk (GaR) of Adrian et al. (2019) by considering the nonlinear nexus between macro-financial environment indexes and economic growth. In this extension, we use the threshold quantile regression model to investigate the nonlinear impact of five constructed macro-financial environment indexes on economic growth and measure China’s GaR from 2021Q1 to 2021Q4. The empirical results show that the threshold effect does exist. Incorporating this nonlinear relationship significantly improves the accuracy of China’s GaR measure in terms of smaller prediction loss.