IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Evaluation of macroeconomic models for financial stability analysis

  • Gunnar Bardsen
  • Kjersti-Gro Lindquist
  • Dimitrios P.Tsomocos

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.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.finance.ox.ac.uk/file_links/finecon_papers/2006fe01.pdf
Download Restriction: no

Paper provided by Oxford Financial Research Centre in its series OFRC Working Papers Series with number 2006fe01.

as
in new window

Length:
Date of creation: 2006
Date of revision:
Handle: RePEc:sbs:wpsefe:2006fe01
Contact details of provider: Web page: http://www.finance.ox.ac.uk
Email:


More information through EDIRC

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.:

as in new window
  1. Azariadis Costas & Smith Bruce D., 1993. "Adverse Selection in the Overlapping Generations Model: The Case of Pure Exchange," Journal of Economic Theory, Elsevier, vol. 60(2), pages 277-305, August.
  2. Jagjit S. Chadha & Lucio Sarno & Giorgio Valente, 2004. "Monetary Policy Rules, Asset Prices and Exchange Rates," CDMA Working Paper Series 200403, Centre for Dynamic Macroeconomic Analysis.
  3. Katarina Juselius & Søren Johansen, 2005. "Extracting Information from the Data: A Popperian View on Empirical Macro," Discussion Papers 05-05, University of Copenhagen. Department of Economics.
  4. Dimitrios P. Tsomocos, 2003. "Equilibrium Analysis, Banking and Financial Instability," OFRC Working Papers Series 2003fe08, Oxford Financial Research Centre.
  5. Svensson, Lars E.O., 1998. "Open-Economy Inflation Targeting," Seminar Papers 638, Stockholm University, Institute for International Economic Studies.
  6. Del Negro, Marco & Schorfheide, Frank & Smets, Frank & Wouters, Raf, 2005. "On the fit and forecasting performance of New-Keynesian models," Working Paper Series 0491, European Central Bank.
  7. Ben Bernanke & Mark Gertler & Simon Gilchrist, 1998. "The Financial Accelerator in a Quantitative Business Cycle Framework," NBER Working Papers 6455, National Bureau of Economic Research, Inc.
  8. Ralph Chami & Thomas F. Cosimano, 2001. "Monetary Policy with a touch of Basel," IMF Working Papers 01/151, International Monetary Fund.
  9. Charles Goodhart & Pojanart Sunirand & Dimitrios P. Tsomocos, 2004. "A model to analyse financial fragility: applications," LSE Research Online Documents on Economics 24680, London School of Economics and Political Science, LSE Library.
  10. Laurence M. Ball, 1999. "Policy Rules for Open Economies," NBER Chapters, in: Monetary Policy Rules, pages 127-156 National Bureau of Economic Research, Inc.
  11. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
  12. Charles Goodhart & Pojanart Sunirand & Dimitrios P. Tsomocos, 2004. "A model to analyse financial fragility," LSE Research Online Documents on Economics 24703, London School of Economics and Political Science, LSE Library.
  13. Harald Uhlig, 1998. "A Toolkit for Analysing Nonlinear Dynamic Stochastic Models Easily," QM&RBC Codes 123, Quantitative Macroeconomics & Real Business Cycles.
  14. Gunnar Bårdsen & Q. Farooq Akram & Øyvind Eitrheim, 2005. "Monetary policy and asset prices: To respond or not?," Working Paper Series 5405, Department of Economics, Norwegian University of Science and Technology.
  15. Charles A.E. Goodhart & Pojanart Sunirand & Dimitrios P. Tsomocos, 2004. "A Time Series Analysis of Financial Fragility in the UK Banking System," OFRC Working Papers Series 2004fe18, Oxford Financial Research Centre.
  16. Townsend, Robert M., 1979. "Optimal contracts and competitive markets with costly state verification," Journal of Economic Theory, Elsevier, vol. 21(2), pages 265-293, October.
  17. Hendry, David F. & Pagan, Adrian R. & Sargan, J.Denis, 1984. "Dynamic specification," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 18, pages 1023-1100 Elsevier.
  18. Marco Del Negro & Frank Schorfheide, 2004. "Priors from General Equilibrium Models for VARS," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(2), pages 643-673, 05.
  19. William A. Allen & Geoffrey Wood, 2005. "Defining and Achieving Financial Stability," FMG Special Papers sp160, Financial Markets Group.
  20. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  21. Robert G. King & Charles I. Plosser & James H. Stock & Mark W. Watson, 1987. "Stochastic Trends and Economic Fluctuations," NBER Working Papers 2229, National Bureau of Economic Research, Inc.
  22. Charles Bean, 2003. "Asset Prices, Financial Imbalances and Monetary Policy: Are Inflation Targets Enough?," RBA Annual Conference Volume, in: Anthony Richards & Tim Robinson (ed.), Asset Prices and Monetary Policy Reserve Bank of Australia.
  23. Campbell, John, 1994. "Inspecting the Mechanism: An Analytical Approach to the Stochastic Growth Model," Scholarly Articles 3196342, Harvard University Department of Economics.
  24. Dimitrios P. Tsomocos & Lea Zicchino, 2005. "On modelling endogenous default," LSE Research Online Documents on Economics 24667, London School of Economics and Political Science, LSE Library.
  25. Smets, Frank & Wouters, Raf, 2002. "An estimated stochastic dynamic general equilibrium model of the euro area," Working Paper Series 0171, European Central Bank.
  26. Stephen G. Cecchetti & Anil K Kashyap, 1995. "International Cycles," NBER Working Papers 5310, National Bureau of Economic Research, Inc.
  27. Michael Woodford, 2000. "Pitfalls of Forward-Looking Monetary Policy," American Economic Review, American Economic Association, vol. 90(2), pages 100-104, May.
  28. Nicoletta Batini & Andrew G Haldane, 1999. "Forward-looking rules for monetary policy," Bank of England working papers 91, Bank of England.
  29. Frank Hahn & Robert Solow, 1997. "A Critical Essay on Modern Macroeconomic Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 026258154x, December.
  30. Anthony Garratt & Kevin Lee & M. Hashem Pesaran & Yongcheol Shin, 2003. "A Long run structural macroeconometric model of the UK," Economic Journal, Royal Economic Society, vol. 113(487), pages 412-455, 04.
  31. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
  32. Bordo, Michael D & Jeanne, Olivier, 2002. "Boom-Busts in Asset Prices, Economic Instability and Monetary Policy," CEPR Discussion Papers 3398, C.E.P.R. Discussion Papers.
  33. Charles A.E. Goodhart & Pojanart Sunirand & Dimitrios P. Tsomocos, 2005. "A risk assessment model for banks," Annals of Finance, Springer, vol. 1(2), pages 197-224, 09.
  34. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
  35. Blum, Jurg & Hellwig, Martin, 1995. "The macroeconomic implications of capital adequacy requirements for banks," European Economic Review, Elsevier, vol. 39(3-4), pages 739-749, April.
  36. Granger,Clive W. J., 1999. "Empirical Modeling in Economics," Cambridge Books, Cambridge University Press, number 9780521662086, November.
  37. Reichlin, Pietro & Siconolfi, Paolo, 2000. "Optimal Debt Contracts and Moral Hazard Along the Business Cycle," CEPR Discussion Papers 2351, C.E.P.R. Discussion Papers.
  38. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
  39. King, Robert G. & Plosser, Charles I. & Rebelo, Sergio T., 1988. "Production, growth and business cycles : I. The basic neoclassical model," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 195-232.
  40. Frederic S. Mishkin, 1999. "Global Financial Instability: Framework, Events, Issues," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 3-20, Fall.
  41. Bernanke, Ben & Gertler, Mark, 1989. "Agency Costs, Net Worth, and Business Fluctuations," American Economic Review, American Economic Association, vol. 79(1), pages 14-31, March.
  42. Ben S. Bernanke & Mark Gertler, 2001. "Should Central Banks Respond to Movements in Asset Prices?," American Economic Review, American Economic Association, vol. 91(2), pages 253-257, May.
  43. Hyman P. Minsky, 1992. "The Financial Instability Hypothesis," Economics Working Paper Archive wp_74, Levy Economics Institute.
  44. Bårdsen Gunnar & Hurn Stan & Lindsay Kenneth A., 2004. "Linearizations and Equilibrium Correction Models," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 8(4), pages 1-9, December.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:sbs:wpsefe:2006fe01. 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: (Maxine Collett)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.