Abstract:
This paper integrates financial risk and economic growth within a unified analytical framework using the Growth-at-Risk (GaR) model. It analyzes the impact of financial conditions (risks) on economic growth from two perspectives: the current-period risk distribution and intertemporal risk trade-offs. The paper constructs financial conditions and macro-financial vulnerability indices based on a wide range of fundamental indicators, capturing the cyclical characteristics of China's macro-financial environment. The empirical GaR results suggest that:
(1) Tight financial conditions and rising macro-financial vulnerabilities both exert significant negative effects on economic growth;
(2) Policy responses to the 2008 global financial crisis and China’s supply-side structural reforms since 2015 indicate that accommodative (tightening) policies may stimulate (suppress) short-term growth but tend to undermine (enhance) long-term growth potential;
(3) The negative shock from the COVID-19 pandemic has been mainly short-term, with relatively limited long-term effects. This highlights the need to strike a dynamic balance between stabilizing growth and managing risk in response to the pandemic.

Keywords: Growth-at-Risk; Financial Risk; Economic Growth; Macro-Financial Linkages