 How severe are the EBA macroeconomic scenarios for the Italian Economy? A joint probability approachManuel Bonucchi and Michele Catalano Journal of International Money and Finance, 2022, vol. 129, issue C Abstract: Measures of the severity of macroeconomic scenarios have been widely used in the literature, but a consistent methodology for their calculation has not been developed yet. Against this background, we provide a general method for calculating the joint probability of observing a macroeconomic scenario, which can be applied to various structural models. By doing so, we can attach probabilities to scenarios produced with multidimensional economic models to compare their severity and plausibility. We apply our methodology to the 2016 and 2018 EBA stress test scenarios and also provide reverse stress test applications. Our results show that for the Italian economy, the 2016 and 2018 EBA scenarios are unlikely, especially the 2016 one. The reverse stress tests allow us to identify the key variables that affect our probabilities. Keywords: Multiple simultaneous equation models; Stress tests; Financial instability; Macroprudential; Joint probability (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:129:y:2022:i:c:s0261560622001383 DOI: 10.1016/j.jimonfin.2022.102735 Access Statistics for this article Journal of International Money and Finance is currently edited by J. R. Lothian More articles in Journal of International Money and Finance from Elsevier |
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