Vulnerable Growth : A Revisit

English Abstract: This paper studies the distributional linkages between future economic performance and current conditions by means of a flexible quantile regression method. The examination of the linkages suggests that the conditional quantiles are nonlinear, which offers a new perspective on the conditional distribution. The nonlinearity causes countercyclical volatility to break down in both the right and left tails, the breakdown being associated with positive skewness in the short-term. As a corollary, in periods of recessions accompanied by a financial crisis, downside risks inherent in the distribution are smaller than we would think otherwise based on linear quantile regression