BEAST: A model for the assessment of system-wide risks and macroprudential policies

Katarzyna Budnik (), Johannes Groß, Gianluca Vagliano, Ivan Dimitrov, Max Lampe, Jiri Panos, Sofia Velasco, Louis Boucherie and Martina Jančoková

No 2855, Working Paper Series from European Central Bank

Abstract: The Banking Euro Area Stress Test (BEAST) is a large-scale semi-structural model developed to analyse the euro area banking system from a macroprudential perspective. The model combines the dynamics of approximately 90 of the largest euro area banks with those of individual euro area economies. It reflects the heterogeneity of banks by replicat-ing the structure of their balance sheets and profit and loss accounts. Additionally, it allows banks to adjust their assets, funding mix, pricing decisions, management buffers, and profit distribution along with individual bank conditions, including their capital and liquidity re-quirements, and other supervisory limits. The responses of banks impact credit supply con-ditions and have feedback effects on the macroeconomic environment. Stochastic solutions of the model provide a solid foundation for investigating multiple scenarios, deriving at-risk measures, and estimating model uncertainty. The model is regularly utilised to assess the resilience of the euro area banking sector, including in the biennial ECB macroprudential stress tests, as well as to analyse the effects of regulatory, macroprudential, and monetary policy changes. JEL Classification: E37, E58, G21, G28

Keywords: banking sector deleveraging; macroprudential policy; macro stress test; real economy-financial sector feedback loop (search for similar items in EconPapers)
Date: 2023-10
New Economics Papers: this item is included in nep-ban, nep-cba, nep-eec, nep-fdg, nep-mon and nep-rmg
Note: 1355359
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Citations: View citations in EconPapers (4)

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