Financial Stability in Brazil
This paper proposes a working definition for “financial stability” related to systemic risk. Systemic risk is then measured as the probability of disruption of financial services taking into account its time and cross-sectional dimensions and several risk factors. The paper discusses the implications of this definition for Brazil in the aftermath of the recent global financial crisis. A comparison with the United States and the Euro zone is provided. In addition, systemic risk in the Brazilian credit market is investigated given its crucial role as main financial stability driver. Finally, synthetic indicators of systemic risk are used to monitor financial stability. The link between systemic risk and synthetic indicators and/or well-correlated proxies (e.g., a credit-to-GDP gap) allows the calculation of the probability of disruption of the financial system across its time dimension. Therefore, if a Financial Stability Committee and/or the prudential regulator define its tolerance level for “financial stability” as a threshold measured by this probability of disruption, it might have the capability of determining the precise moment when it should strengthen its set of adequate macroprudential responses and policies.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Markose, Sheri M & Giansante, Simone & Gatkowski, Mateusz & Shaghaghi, Ali Rais, 2010.
"Too Interconnected To Fail: Financial Contagion and Systemic Risk in Network Model of CDS and Other Credit Enhancement Obligations of US Banks,"
Economics Discussion Papers
3716, University of Essex, Department of Economics.
- Sheri Markose & Simone Giansante & Mateusz Gatkowski & Ali Rais Shaghaghi, 2010. "Too Interconnected To Fail: Financial Contagion and Systemic Risk In Network Model of CDS and Other Credit Enhancement Obligations of US Banks," Working Papers 033, COMISEF.
- Claudio Borio & Mathias Drehmann, 2009.
"Towards an Operational Framework for Financial Stability: "Fuzzy" Measurement and its Consequences,"
Working Papers Central Bank of Chile
544, Central Bank of Chile.
- Claudio Borio & Mathias Drehmann, 2011. "Toward an Operational Framework for Financial Stability: “Fuzzy” Measurement and Its Consequences," Central Banking, Analysis, and Economic Policies Book Series, in: Rodrigo Alfaro (ed.), Financial Stability, Monetary Policy, and Central Banking, edition 1, volume 15, chapter 4, pages 063-123 Central Bank of Chile.
- Claudio Borio & Claudio Mathias Drehmann, 2009. "Towards an operational framework for financial stability: "fuzzy" measurement and its consequences," BIS Working Papers 284, Bank for International Settlements.
- Agénor, P.-R. & Alper, K. & Pereira da Silva, L., 2009.
"Capital requirements and business cycles with credit market imperfections,"
Policy Research Working Paper Series
5151, The World Bank.
- Agénor, P.-R. & Alper, K. & Pereira da Silva, L., 2012. "Capital requirements and business cycles with credit market imperfections," Journal of Macroeconomics, Elsevier, vol. 34(3), pages 687-705.
- Pierre-Richard Agénor & Koray Alper & Luiz Pereira da Silva, 2009. "Capital Requirements and Business Cycles with Credit Market Imperfections," Centre for Growth and Business Cycle Research Discussion Paper Series 124, Economics, The Univeristy of Manchester.
- Pierre-Richard & K. Alper & L. Pereira da Silva, 2011. "Capital Requirements and Business Cycles with Credit Market Imperfections," Working Papers Series 231, Central Bank of Brazil, Research Department.
- Ricardo Schechtman & Wagner Piazza Gaglianone, 2011.
"Macro Stress Testing of Credit Risk Focused on the Tails,"
Working Papers Series
241, Central Bank of Brazil, Research Department.
- Schechtman, Ricardo & Gaglianone, Wagner Piazza, 2012. "Macro stress testing of credit risk focused on the tails," Journal of Financial Stability, Elsevier, vol. 8(3), pages 174-192.
- Drehmann, Mathias & Tarashev, Nikola, 2013.
"Measuring the systemic importance of interconnected banks,"
Journal of Financial Intermediation,
Elsevier, vol. 22(4), pages 586-607.
- Nikola Tarashev & Mathias Drehmann, 2011. "Measuring the systemic importance of interconnected banks," BIS Working Papers 342, Bank for International Settlements.
- Charles Goodhart, 2011. "The Macro-Prudential Authority: Powers, Scope and Accountability," FMG Special Papers sp203, Financial Markets Group.
- GermÃ¡n LÃ³pez-Espinosa & Antonio Rubia & Laura Valderrama & Antonio Moreno, 2012.
"Systemic Risk and Asymmetric Responses in the Financial Industry,"
IMF Working Papers
12/152, International Monetary Fund.
- López-Espinosa, Germán & Moreno, Antonio & Rubia, Antonio & Valderrama, Laura, 2015. "Systemic risk and asymmetric responses in the financial industry," Journal of Banking & Finance, Elsevier, vol. 58(C), pages 471-485.
- Co-Pierre Georg, 2010. "The effect of the interbank network structure on contagion and financial stability," Global Financial Markets Working Paper Series 12-2010, Friedrich-Schiller-University Jena.
- Bongini, Paola & Laeven, Luc & Majnoni, Giovanni, 2002. "How good is the market at assessing bank fragility? A horse race between different indicators," Journal of Banking & Finance, Elsevier, vol. 26(5), pages 1011-1028, May.
- Franklin Allen & Douglas Gale, 1999.
Levine's Working Paper Archive
2092, David K. Levine.
- Marcos R. de Castro & Solange N. Gouvea & André Minella & Rafael C. dos Santos & Nelson F. Souza-Sobrinho, 2011. "SAMBA: Stochastic Analytical Model with a Bayesian Approach," Working Papers Series 239, Central Bank of Brazil, Research Department.
- Adriana Soares Sales & Waldyr D. Areosa & Marta B. M. Areosa, 2012. "Some Financial Stability Indicators for Brazil," Working Papers Series 287, Central Bank of Brazil, Research Department.
- Gianni De Nicolo & Giovanni Favara & Lev Ratnovski, 2012. "Externalities and Macroprudential Policy," IMF Staff Discussion Notes 12/05, International Monetary Fund.
- William A. Allen & Geoffrey Wood, 2005. "Defining and Achieving Financial Stability," FMG Special Papers sp160, Financial Markets Group.
- Frederic S. Mishkin, 1991. "Anatomy of a Financial Crisis," NBER Working Papers 3934, National Bureau of Economic Research, Inc.
- Claudio Borio, 2011.
"Rediscovering the macroeconomic roots of financial stability policy: journey, challenges and a way forward,"
BIS Working Papers
354, Bank for International Settlements.
- Claudio Borio, 2011. "Rediscovering the Macroeconomic Roots of Financial Stability Policy: Journey, Challenges, and a Way Forward," Annual Review of Financial Economics, Annual Reviews, vol. 3(1), pages 87-117, December.
- Alessi, Lucia & Detken, Carsten, 2009. "'Real time'early warning indicators for costly asset price boom/bust cycles: a role for global liquidity," Working Paper Series 1039, European Central Bank.
- Luiz Awazu Pereira da Silva & Ricardo Eyer Harris, 2012. "Sailing through the Global Financial Storm: Brazil's recent experience with monetary and macroprudential policies to lean against the financial cycle and deal with systemic risks," Working Papers Series 290, Central Bank of Brazil, Research Department.
- Philip Lowe & Claudio Borio, 2002. "Asset prices, financial and monetary stability: exploring the nexus," BIS Working Papers 114, Bank for International Settlements.
When requesting a correction, please mention this item's handle: RePEc:bcb:wpaper:289. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Francisco Marcos Rodrigues Figueiredo)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.