CNB seminar "Risk in a Data Rich model"

Prague, 1 April 2025

Haroon Mumtaz (Queen Mary University of London)

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Haroon Mumtaz is a Professor of Economics at Queen Mary University of London. His research interests are in applied Bayesian econometrics, monetary policy and International Macroeconomics. Previously Haroon was an economist at the Centre of Central Banking Studies in the Bank of England.

Risk in a Data Rich model (abstract)

This paper uses a dynamic factor model with endogenous stochastic volatility to quantify risk around the outlook across a broad dataset of macroeconomic and financial indicators. We find that risk is pervasive, countercyclical, and asymmetric, with the risk of negative outcomes exhibiting greater volatility than the risk of positive ones for most indicators. Furthermore, we estimate significant heterogeneity in risk dynamics between prices and quantities across sectors. Risk patterns also shift over time, with supply-driven risk dominant pre-1983 and demand-driven risk prevalent through 2019, especially during the global financial crisis. Financial and price factors emerge as key drivers of risk.