The IMF Working Papers series is designed to make IMF staff research available to a wide audience. Almost 300 Working Papers are released each year, covering a wide range of theoretical and analytical topics, including balance of payments, monetary and fiscal issues, global liquidity, and national and international economic developments.
Giving stress tests a macroprudential perspective requires (i) incorporating general equilibrium
dimensions, so that the outcome of the test depends not only on the size of the shock and the
buffers of individual institutions but also on their behavioral responses and their interactions with
each other and with other economic agents; and (ii) focusing on the resilience of the system as a
whole. Progress has been made toward the first goal: several models are now available that
attempt to integrate solvency, liquidity, and other sources of risk and to capture some behavioral
responses and feedback effects. But building models that measure correctly systemic risk and the
contribution of individual institutions to it while, at the same time, relating the results to the
established regulatory framework has proved more difficult. Looking forward, making
macroprudential stress tests more effective would entail using a variety of analytical approaches
and scenarios, integrating non-bank financial entities, and exploring the use of agent-based
models. As well, macroprudential stress tests should not be used in isolation but be treated as
complements to other tools and-crucially-be combined with microprudential perspectives.