Systemic Real and Financial Risks Measurement, Forecasting, and Stress Testing
This paper formulates a novel modeling framework that delivers: (a) forecasts of indicators of systemic real risk and systemic financial risk based on density forecasts of indicators of real activity and financial health; (b) stress-tests as measures of the dynamics of responses of systemic risk ind...
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Format: | eBook |
Language: | English |
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Washington, D.C.
International Monetary Fund
2012
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Series: | IMF Working Papers
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Collection: | International Monetary Fund - Collection details see MPG.ReNa |
Summary: | This paper formulates a novel modeling framework that delivers: (a) forecasts of indicators of systemic real risk and systemic financial risk based on density forecasts of indicators of real activity and financial health; (b) stress-tests as measures of the dynamics of responses of systemic risk indicators to structural shocks identified by standard macroeconomic and banking theory. Using a large number of quarterly time series of the G-7 economies in 1980Q1-2010Q2, we show that the model exhibits significant out-of sample forecasting power for tail real and financial risk realizations, and that stress testing provides useful early warnings on the build-up of real and financial vulnerabilities |
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Physical Description: | 41 pages |
ISBN: | 9781463937768 |