Financial vulnerability and Growth at Risk (GaR).

This work empirically analyzes if financial variables are more important in predicting GDP growth under risk scenarios. We use Peruvian data to estimate the loss in GDP growth under extreme risk scenarios using the "Growth at Risk" methodology developed by Adrian, Boyarchenko & Giannone (2019). We consider 3 different categories of financial risk data: leverage variables, domestic asset prices and foreign financial variables. The results show that excessive credit and asset prices growth rates are good indicators of a downturn in future financial conditions and of a lower GDP growth under risk scenarios using different forecast horizons. Moreover, including financial variables improve the forecast of GDP growth rates under crisis scenarios, such as the one observed during the Global Financial Crisis of 2008-2009.