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Stress Testing of Financial Systems; An Overview of Issues, Methodologies, and FSAP Experiences


  • Maria Soledad Martinez Peria
  • Giovanni Majnoni
  • Matthew T Jones
  • Winfrid Blaschke


The paper has three objectives. After a general introduction to some of the concepts and basic techniques of stress testing, the paper gives an overview of some of the conceptual issues involved in evaluating risks at the aggregated level of financial systems. Second, this study provides a basic framework and toolkit for conducting stress tests. Finally, the paper reviews some of the stress-testing analyses conducted in the context of the Financial Sector Assessment Program (FSAP) and suggests simplified approaches to deal with situations where the quantity and quality of the data is less than ideal.

Suggested Citation

  • Maria Soledad Martinez Peria & Giovanni Majnoni & Matthew T Jones & Winfrid Blaschke, 2001. "Stress Testing of Financial Systems; An Overview of Issues, Methodologies, and FSAP Experiences," IMF Working Papers 01/88, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:01/88

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    References listed on IDEAS

    1. Ana del Río & Garry Young, 2005. "The impact of unsecured debt on financial distress among British households," Working Papers 0512, Banco de España;Working Papers Homepage.
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    4. Muzafar Shah Habibullah & Peter Smith & W. N. W. Azman-Saini, 2006. "Testing liquidity constraints in 10 Asian developing countries: an error-correction model approach," Applied Economics, Taylor & Francis Journals, vol. 38(21), pages 2535-2543.
    5. Campbell, Jeffrey R. & Hercowitz, Zvi, 2009. "Welfare implications of the transition to high household debt," Journal of Monetary Economics, Elsevier, vol. 56(1), pages 1-16, January.
    6. Herrala, Risto & Kauko, Karlo, 2007. "Household loan loss risk in Finland : estimations and simulations with micro data," Research Discussion Papers 5/2007, Bank of Finland.
    7. Ceyla Pazarbasioglu & Gudrun Johnsen & Paul Louis Ceriel Hilbers & Inci Ötker, 2005. "Assessing and Managing Rapid Credit Growth and the Role of Supervisory and Prudential Policies," IMF Working Papers 05/151, International Monetary Fund.
    8. Dean M. Maki, 2000. "The growth of consumer credit and the household debt service burden," Finance and Economics Discussion Series 2000-12, Board of Governors of the Federal Reserve System (U.S.).
    9. Coricelli, Fabrizio & Mucci, Fabio & Revoltella, Debora, 2006. "Household Credit in the New Europe: Lending Boom or Sustainable Growth?," CEPR Discussion Papers 5520, C.E.P.R. Discussion Papers.
    10. Tommaso Monacelli, 2008. "Optimal Monetary Policy with Collateralized Household Debt and Borrowing Constraints," NBER Chapters,in: Asset Prices and Monetary Policy, pages 103-146 National Bureau of Economic Research, Inc.
    11. Gabe de Bondt, 1999. "Credit channels and consumption in Europe: empirical evidence," BIS Working Papers 69, Bank for International Settlements.
    12. Fumio Hayashi, 1985. "The Effect of Liquidity Constraints on Consumption: A Cross-Sectional Analysis," The Quarterly Journal of Economics, Oxford University Press, vol. 100(1), pages 183-206.
    13. Guy Debelle, 2004. "Macroeconomic implications of rising household debt," BIS Working Papers 153, Bank for International Settlements.
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