Systemic Real and Financial Risks: Measurement, Forecasting, and Stress Testing
41 Pages Posted: 25 Mar 2012
Date Written: February 2012
Abstract
This paper formulates a novel modeling framework that delivers: (a) forecasts of indicators of systemic real risk and systemic financial risk based on density forecasts of indicators of real activity and financial health; (b) stress-tests as measures of the dynamics of responses of systemic risk indicators to structural shocks identified by standard macroeconomic and banking theory. Using a large number of quarterly time series of the G-7 economies in 1980Q1-2010Q2, we show that the model exhibits significant out-of sample forecasting power for tail real and financial risk realizations, and that stress testing provides useful early warnings on the build-up of real and financial vulnerabilities.
Keywords: Systemic Risks, Dynamic Factor Model, Quantile Auto-regressions, Density Forecasts, Economic Indicators, Financial Risk, Forecasting Models, Group Of Seven, Econometric Modeling, Prices, Business Fluctuations, And Cycles,financial Institutions And Services
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
The US Dollar Shortage in Global Banking
By Patrick Mcguire, Goetz Von Peter, ...
-
Banking Globalization, Monetary Transmission, and the Lending Channel
-
The US Dollar Shortage in Global Banking and the International Policy Response
By Patrick Mcguire and Goetz Von Peter
-
Interpreting Deviations from Covered Interest Parity during the Financial Market Turmoil of 2007-08
By Naohiko Baba and Frank Packer
-
Interpreting Deviations from Covered Interest Parity During the Financial Market Turmoil of 2007-08
By Naohiko Baba and Frank Packer
-
US Dollar Money Market Funds and Non-US Banks
By Naohiko Baba, Robert N. Mccauley, ...
-
By Naohiko Baba and Frank Packer
-
Global Banks and International Shock Transmission: Evidence from the Crisis
-
Global Banks and International Shock Transmission: Evidence from the Crisis