Macroprudential Stress Tests and Policies: Searching for Robust and Implementable Frameworks

Abstract

Macroprudential stress testing (MaPST) is becoming firmly embedded in the post-crisispolicy-frameworks of financial-sectors around the world. MaPSTs can offer quantitative,forward-looking assessments of the resilience of financial systems as a whole, to particularlyadverse shocks. Therefore, they are well suited to support the surveillance of macrofinancialvulnerabilities and to inform the use of macroprudential policy-instruments. This reportsummarizes the findings of a joint-research effort by MCM and the Systemic-Risk-Centre,which aimed at (i) presenting state-of-the-art approaches on MaPST, including modeling andimplementation-challenges; (ii) providing a roadmap for future-research, and; (iii) discussingthe potential uses of MaPST to support policy.

Keywords: Financial crises, Systemic risk, Macroprudential Policy, Financial stability, Stress testing, Macroprudential Stress testing, Asset Pricing, Financial Markets and the Macroeconomy, Bayesian Analysis, Semiparametric and Nonparametric Methods, Cross-Sectional Models, Model Evaluation and Testing, Financial Econometrics

JEL Classification: G01, G12, E44, C11, C14, C15, C31, C52, C58, C61