Stress testing tools: where we stand and where to go?

Claudio Barbieri, Grzegorz Hałaj and Christoffer Kok

Chapter 13 in Research Handbook of Macroprudential Policy, 2026, pp 296-317 from Edward Elgar Publishing

Abstract: Stress tests are now well-established crisis prevention and crisis resolution tools that have contributed to building up banks’ capital since their introduction after the Great Financial Crisis until today. While most microprudential stress tests focus on first-round effects, capturing second-round effects is far from straightforward, as there is no single analytical approach through which either macro-financial feedback effects or financial contagion effects can be captured. In this chapter, we explore some analytical approaches currently at the frontier of stress testing and highlight promising ways forward. We argue that improving our understanding of the underlying economic and social mechanisms in the fast-changing financial sector, such as trends in globalisation and technological progress, should leverage increasing data quality and availability, state-of-the-art statistical techniques, and collaboration between jurisdictions.

Keywords: Stress Test; Financial Stability; Banking Supervision (search for similar items in EconPapers)
Date: 2026
ISBN: 9781035306206
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