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Evaluation of macroeconomic models for financial stability analysis

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  • Gunnar Bårdsen

    ()
    (NTNU, Department of Economics and Norges Bank (Central Bank of Norway))

  • Kjersti-Gro Lindquist

    ()
    (Norges Bank (Central Bank of Norway))

  • Dimitrios P. Tsomocos

    ()
    (Saïd Business School and St. Edmund Hall, Oxford University)

Abstract

As financial stability has gained focus in economic policymaking, the demand for analyses of financial stability and the consequences of economic policy has increased. Alternative macroeconomic models are available for policy analyses, and this paper evaluates the usefulness of some models from the perspective of financial stability. Financial stability analyses are complicated by the lack of a clear and consensus definition of ‘financial stability’, and the paper concludes that operational definitions of this term must be expected to vary across alternative models. Furthermore, since assessment of financial stability in general is based on a wide range of risk factors, one can not expect one single model to satisfactorily capture all the risk factors. Rather, a suite of models is needed. This is in particular true for the evaluation of risk factors originating and developing inside and outside the financial system respectively.

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Bibliographic Info

Paper provided by Norges Bank in its series Working Paper with number 2006/01.

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Length: 41 pages
Date of creation: 15 Feb 2006
Date of revision:
Handle: RePEc:bno:worpap:2006_01

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Keywords: Financial stability; Banks; Default; Macroeconomic models; Policy;

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Citations

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Cited by:
  1. Q. Akram & Gunnar Bårdsen & Kjersti-Gro Lindquist, 2007. "Pursuing financial stability under an inflation-targeting regime," Annals of Finance, Springer, vol. 3(1), pages 131-153, January.
  2. Dale F. Gray & James P Walsh, 2008. "Factor Model for Stress-testing with a Contingent Claims Model of the Chilean Banking System," IMF Working Papers 08/89, International Monetary Fund.
  3. Stan du Plessis & Gideon du Rand, 2011. "On the (non-)equivalence of capital adequacy and monetary policy: A response to Cechetti and Kohler," Working Papers 04/2011, Stellenbosch University, Department of Economics.
  4. Jonas Dovern & Carsten-Patrick Meier & Johannes Vilsmeier, 2008. "How Resilient is the German Banking System to Macroeconomic Shocks?," Kiel Working Papers 1419, Kiel Institute for the World Economy.
  5. David Pérez-Reyna, . "Una aproximación para analizar la estabilidad financiera por medio de un DSGE," Temas de Estabilidad Financiera 040, Banco de la Republica de Colombia.
  6. Rasmus Kattai, 2010. "Credit risk model for the Estonian banking sector," Bank of Estonia Working Papers wp2010-01, Bank of Estonia, revised 04 Feb 2010.
  7. Hernando Vargas Herrera & Dpto de Estabilidad Financiera, . "El Riesgo de Mercado de la Deuda Pública: ¿Una Restricción a la Política Monetaria? El Caso Colombiano," Borradores de Economia 382, Banco de la Republica de Colombia.
  8. Bluhm, Marcel & Krahnen, Jan Pieter, 2011. "Default risk in an interconnected banking system with endogeneous asset markets," CFS Working Paper Series 2011/19, Center for Financial Studies (CFS).
  9. Dale F. Gray; & Robert C. Merton & Zvi Bodie, 2009. "New Framework for Measuring and Managing Macrofinancial Risk and Financial Stability," Working Papers Central Bank of Chile 541, Central Bank of Chile.
  10. Roger Hammersland & Cathrine Bolstad Træe, 2011. "The Financial Accelerator and the real economy. Self-reinforcing feedback loops in a core macro econometric model for Norway," Discussion Papers 668, Research Department of Statistics Norway.
  11. Eric Tymoigne, 2010. "Detecting Ponzi Finance: An Evolutionary Approach to the Measure of Financial Fragility," Economics Working Paper Archive wp_605, Levy Economics Institute, The.
  12. Yonggang Ye & Jiaqi Yang & Lingfeng Song & Pei ZHang, 2013. "Macroeconomics Framework Considered Risk Factors: Based on Default Distance," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 124-133, December.
  13. Agustín Saade & Daniel Osorio & Dairo Estrada, 2007. "An equilibrium approach to financial stability analysis: the Colombian case," Annals of Finance, Springer, vol. 3(1), pages 75-105, January.
  14. Fioramanti, Marco & Vicarelli, Claudio, 2011. "The New Stability and Growth Pact: Primum non nocere," CEPS Papers 4370, Centre for European Policy Studies.
  15. Jan Willem van den End & Marco Hoeberichts & Mostafa Tabbae, 2006. "Modelling Scenario Analysis and Macro Stress-testing," DNB Working Papers 119, Netherlands Central Bank, Research Department.
  16. Hernando Vargas H. & Dpto de Estabilidad Financiera, 2006. "El Riesgo De Mercado De La Deuda Pública:¿Una Restricción A La Política Monetaria?El Caso Colombiano," BORRADORES DE ECONOMIA 002543, BANCO DE LA REPÚBLICA.

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