Systemic Real and Financial Risks: Measurement, Forecasting, and Stress Testing

Marcella Lucchetta and Gianni De Nicolo

No 2012/058, IMF Working Papers from International Monetary Fund

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: WP; Systemic Risks; Dynamic Factor Model; Quantile Auto-regressions; Density Forecasts; bank credit growth; quantile estimate; quantile auto-regression; risk indicator; quantile curve; time series; loan rate; forecasting power; quantile projection; estimation procedure; bank credit demand shocks; Systemic risk; Bank credit; Stress testing; Systemic risk assessment; Loans; Global (search for similar items in EconPapers)
Pages: 41
Date: 2012-02-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (32)

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=25745 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2012/058

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().