Ron Anderson, Jon Danielsson, Chikako Baba, Mr. Udaibir S Das, Mr. Heedon Kang, and Miguel A. Segoviano
Macroprudential stress testing (MaPST) is becoming firmly embedded in the post-crisis
policy-frameworks of financial-sectors around the world. MaPSTs can offer quantitative,
forward-looking assessments of the resilience of financial systems as a whole, to particularly
adverse shocks. Therefore, they are well suited to support the surveillance of macrofinancial
vulnerabilities and to inform the use of macroprudential policy-instruments. This report
summarizes the findings of a joint-research effort by MCM and the Systemic-Risk-Centre,
which aimed at (i) presenting state-of-the-art approaches on MaPST, including modeling and
implementation-challenges; (ii) providing a roadmap for future-research, and; (iii) discussing
the potential uses of MaPST to support policy.
This paper develops a panel unobserved components model of the monetary transmission mechanism in the world economy, disaggregated into its fifteen largest national economies. This structural macroeconometric model features extensive linkages between the real and financial sectors, both within and across economies. A variety of monetary policy analysis and forecasting applications of the estimated model are demonstrated, based on a novel Bayesian framework for conditioning on judgment.