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How to Capture Macro-Financial Spillover Effects in Stress Tests? / Heiko Hesse, Ferhan Salman, Christian Schmieder.
- Format:
- Book
- Government document
- Author/Creator:
- Hesse, Heiko.
- Series:
- IMF Working Papers; Working Paper ; No. 2014/103
- IMF Working Papers
- Language:
- English
- Subjects (All):
- Banks and banking--Evaluation.
- Banks and banking.
- Financial crises--Prevention.
- Financial crises.
- Liquidity (Economics)--Econometric models.
- Liquidity (Economics).
- International finance--Evaluation.
- International finance.
- Physical Description:
- 1 online resource (35 p.)
- Place of Publication:
- Washington, D.C. : International Monetary Fund, 2014.
- Language Note:
- English
- Summary:
- One of the challenges of financial stability analysis and bank stress testing is how to establish scenarios with meaningful macro-financial linkages, i.e., taking into account spillover effects and other forms of contagion. We come up with an approach to simulate the potential impact of spillover effects based on the “traditional” design of macro-economic stress tests. Specifically, we examine spillover effects observed during the financial crisis and simulate their impact on banks’ liquidity and capital positions. The outcome suggests that spillover effects have a highly non-linear impact on bank soundness, both in terms of liquidity and solvency.
- Contents:
- Cover; Contents; Abbreviations and Acronyms; I. Introduction; Figures; 1. Stylised Design of Stress Tests; II. Financial Spillovers from the Euro periphery to the Rest of the World; A. Panel Approach; B. DCC GARCH Approach; 1. Estimated GARCH Correlations GIIPS with European Countries; 2. Estimated GARCH Correlations GIIPS with Non-European Countries; 3. Estimated GARCH Correlations GIIPS with EM Countries and Korea; 4. Estimated GARCH Correlations GIIPS with Germany and the U.S:; III. Liquidity and Solvency Stress Testing; Box
- 1. Integrating Liqudity and Solvency Risks and Bank Reaction in Stress TestsIV. Integration of the Financial Spillover Analysis with the Stress Testing Approach; 5. Overview of the concept to simulate stress at the bank level; 6. Outcome of solvency tests; V. Conclusion; 7. Outcome of liquidity tests; Tables; I.1. Spread Panel Regressions, 2006Q1-2012Q2 (Quarterly data); Appendixes; I. Outcome of Panel Regressions Assessing Spillover Risks; I.2. Spread Panel Regressions, 2008Q1-2012Q2 (Quarterly data); I.3. Main Explanatory Variables; II. Outline of the DCC GARCH Method
- III. Benchmark Stress ScenariosIV. Illustrative Example for the Solvency Test; V. Illustrative Example for Liquidity; References
- Notes:
- Description based upon print version of record.
- Includes bibliographical references.
- Description based on online resource; title from PDF title page (ebrary, viewed August 15, 2014).
- ISBN:
- 9781498330527
- 1498330525
- 9781498361729
- 1498361722
- 9781498358453
- 1498358454
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