## vds

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---

### Course overview
- Course Topic: Inclusive Growth and Structural Policies
- Course Title: Vulnerability Diagnostics (VDS)
- Course Description:
  - This advanced course, presented by the IMF Institute for Capacity Development (ICD), complements the Macroeconomic Diagnostics (MDS) course by enhancing participants’ ability to assess fiscal, financial, external, and real vulnerabilities in an integrated fashion using lectures, analytical tools, hands-on workshops, and case studies to measure tail (as opposed to central) risks.
- Course Objectives:
  - Identify appropriate measures of fiscal, financial, external, and real vulnerabilities.
  - Describe how vulnerabilities can morph into distress leading to crises as a result of adverse shocks or flawed policies.
  - Use diagnostic tools to track measures of vulnerabilities and predict indicators of tail risks, including tools currently employed in IMF surveillance.
  - Adapt over time diagnostic tools to their country data.
- Target Audience:
  - Officials of all levels in central banks and ministries of finance or other relevant agencies who monitor and assess country and regional vulnerabilities and risks.
- Pre-requisites:
  - Advanced degree in economics or equivalent experience; basic background in econometrics; some familiarity with software for econometric applications.
  - Some e-learning modules prior to the start of the course will be required—unless one of the following face-to-face or online EdX courses have been taken: Financial Programming and Policies (or FPPx); Macroeconomic Diagnostics (or MDSx); or and Macroeconomic Forecasting (MFx).
- Performance Evaluation:
  - Two multiple-choice tests will be given, one at the beginning of the course and another at the end to ascertain participants’ backgrounds and progress.

### Core and auxiliary topics (structure)
- Core Units (numbered):
  1. Vulnerabilities and Crises
  2. Forecasting Methods for Tail Risks
  3. Fiscal Vulnerabilities I: Assessing Debt Sustainability
  4. Financial Vulnerabilities I: Taxonomy and Measurement of Financial Risks
  5. External Vulnerabilities I: Bond Yields and Sovereign Default Risk
  6. Financial Vulnerabilities II: Detecting Financial Fragility
  7. Fiscal Vulnerability II: Short-term risks
  8. External Vulnerabilities II: Current Account Imbalances
  9. Financial Vulnerabilities III: Financial Cycles, Business Cycles and Systemic Risk
  10. External Vulnerability III: Reserve Adequacy
  11. The IMF’s Vulnerability Exercise
  12. Three Crises: Case Studies
- Auxiliary units (regional customization and advanced tools):
  - Designed to be customized to regions and to expand core units with country-specific examples or more advanced toolkits.
  - Examples (listed as auxiliary units):
    13. Fiscal Vulnerability III: Stochastic DSA
    14. Financial Vulnerability IV: Spillovers and Contagion
    15. Fiscal Vulnerabilities IV: Long-term Risks
    16. Real Sector Vulnerabilities I: Financial Conditions

### Program outline and pedagogy (day-by-day)
- General format:
  - Lectures typically 1.5 hour each.
  - Workshops typically 1.5 hours each.
  - Breakout workshop groups for case study preparation totaling 10.5 hours across Unit 12 preparation sessions.
  - Day ten usually reserved for testing, evaluation and course wrap up.
- DAY 1:
  - UNIT 1: INTRODUCTION TO VULNERABILITIES AND CRISES, AND THE COURSE OVERVIEW
    - Lecture (1.5 hour): Theoretical overview; Vulnerabilities and crises; Structure of the course.
  - UNIT 2: FORECASTING METHODS FOR TAIL RISKS
    - Lecture (1.5 hours): Defining tail risks; VaR measures of tail risks; Logit/Probit models; The signal approach: threshold methods.
    - Workshop (1.5 hours): Predicting Currency Crises via Probit/Logit Regressions.
- DAY 2:
  - UNIT 3: FISCAL VULNERABILITIES I: ASSESSING DEBT SUSTAINABILITY
    - Lecture (1.5 hour): Debt sustainability, debt crisis, and growth; Deterministic DSA in closed and open economies.
    - Workshop (1.5 hours): Assessing debt sustainability: debt-stabilizing primary balance, IMF’s approach to DSA.
  - UNIT 4: FINANCIAL VULNERABILITIES I: TAXONOMY AND MEASUREMENT OF FINANCIAL RISKS
    - Lecture (1.5 hour): Taxonomy of financial risks; Measurement of financial risks.
    - Workshop (1.5 hours): Measurement of risks and introduction to stress testing.
- DAY 3:
  - UNIT 5: EXTERNAL VULNERABILITIES I: BOND YIELDS AND SOVEREIGN DEFAULT RISK
    - Lecture (1.5 hour): From fiscal distress to external crisis; Theory of sovereign default risk; Assessing risks in practice.
    - Auxiliary Workshop (1.5 hours): Explaining Sovereign Bond Interest Rates.
  - UNIT 6: FINANCIAL VULNERABILITIES II: DETECTING FINANCIAL FRAGILITY
    - Lecture (1.5 hour): Overview of stress testing; Single-factor sensitivity analysis; Identifying stress-testing scenarios: Case study.
    - Workshop (1.5 hours): Measurement of risks and introduction to bank stress testing.
- DAY 4:
  - UNIT 7: FISCAL VULNERABILITY II: SHORT-TERM RISKS
    - Lecture (1.5 hour): Risk-based DSA; Interest rate growth differential and public debt; Refined analysis of growth and interest rate shocks.
    - Workshop (1.5 hours): Risk-based DSA, refined analysis of growth and interest rate shocks.
  - UNIT 8: EXTERNAL VULNERABILITIES II: CURRENT ACCOUNT IMBALANCES
    - Lecture (1.5 hour): Current account imbalances; External balance assessment (EBA).
    - Workshop (1.5 hours): External Balance Assessment (EBA) and EBA-Lite applications.
- DAY 5:
  - UNIT 9: FINANCIAL VULNERABILITIES III: FINANCIAL CYCLES, BUSINESS CYCLES AND SYSTEMIC RISK
    - Lecture (1.5 hour): Business cycles and financial cycles; Systemic risk.
    - Workshop (1.5 hours): Financial cycles and banking distress.
  - UNIT 10: EXTERNAL VULNERABILITY III: RESERVE ADEQUACY
    - Lecture (1.5 hour): FX Reserves: definition, composition and trends; Analytics of reserve holdings; Normative assessments of reserve holdings.
    - Workshop (1.5 hours): International Reserves Adequacy.
- DAY 6:
  - UNIT 11: THE IMF’S VULNERABILITY EXERCISES
    - Lecture (1.5 hour): Overview of the VEE; Key indicators and methodologies; Putting it all together and cross sectoral linkages.
    - Workshop (1.5 hours): Putting all Sectors Together and Constructing a Vulnerability Index.
  - UNIT 12: PREPARATION FOR PARTICIPANTS’ PRESENTATIONS
    - Breakout workshop groups (3 hours): Objective is in-depth analysis of crises cases; Preparation for this unit takes 9 hours in total in breakout workshop format; Guidance from counsellors; Group deliverable: Approximately 15 slides and plenary presentations where, if there are three groups, each would have 30 minutes to present, including Q&A.
- DAY 7:
  - UNIT 12: PREPARATION FOR PARTICIPANTS’ PRESENTATIONS (CONTINUED)
    - Breakout workshop groups (6 hours).
- DAY 8:
  - UNIT 12: PARTICIPANTS’ PRESENTATIONS (CONCLUDED)
    - Plenary presentations (1.5 hours); Course wrap up (test, evaluation and closing) or continue with Auxiliary units.
- A.1 For the JVI prior to Unit 12 add from the following Units depending on interests (ending with Unit 12 and course wrap up):
  - UNIT 13: FISCAL VULNERABILITY III: STOCHASTIC DSA
    - Lecture (1.5 hour): Stochastic DSA vs. deterministic DSA; Main steps of stochastic DSA: estimating relationship between DSA inputs, fiscal reaction function, simulations.
    - Workshop (1.5 hours): Stochastic DSA.
- DAY 9:
  - UNIT 14: FINANCIAL VULNERABILITY IV: SPILLOVERS AND CONTAGION
    - Lecture (1.5 hour): Indicators of spillovers; Network analysis; Systemic risk measurement: VaR, CoVaR.
    - Workshop (1.5 hours): VaR, CoVaR, and ∆CoVaR.
  - UNIT 15: FISCAL VULNERABILITIES IV: LONG-TERM RISKS
    - Lecture (1.5 hour): Debt level and fiscal space; Fiscal gaps: full account of government assets and liabilities; Medium- and long-term fiscal adjustment needs.
    - Workshop (1.5 hours): Debt level thresholds; arithmetic of fiscal gaps and long-term adjustment needs.
- DAY 10:
  - UNIT 16: REAL SECTOR VULNERABILITIES I: FROM DOMESTIC AND EXTERNAL FINANCIAL CONDITIONS
    - Lecture (1.5 hour): Tail risk impact on the real economy; Estimating growth at risk from financial prices; Construction of financial conditions index; Aggregating macro financial vulnerabilities.
    - Workshop (1.5 hours): Growth at Risk Toolkit applied to an emerging European economy.
- A.2 For the CEF or STI (or shorter VDS courses):
  - Add regional outlook or pertinent analytical topics (e.g., from REOs) and/or consider other options as per recent offerings.

### Teaching modalities and practical deliverables
- Lecture topics consistently include theoretical foundations, measurement techniques, and IMF-relevant frameworks (e.g., DSA, EBA, ARA metric, stress testing, VEE).
- Workshops focus on applied tools:
  - Probit/Logit regressions, VaR-type measures, ROC analysis, Quantile Regression, stochastic DSA, stress testing, External Balance Assessment (EBA), reserve adequacy metrics (IMF ARA), VaR/CoVaR/∆CoVaR, Growth at Risk toolkit.
- Unit 12 deliverables:
  - Group analysis using terminology/graphs/techniques/spreadsheets learned during the course (e.g., reserve adequacy, EBA, DSA, Stress testing).
  - Approximately 15 slides per group; plenary presentation slots structured so that with three groups each has 30 minutes including Q&A.
- Timing structure:
  - Lectures: 1.5 hour each.
  - Workshops: 1.5 hours each.
  - Unit 12 preparation: 9 hours total across breakout sessions; 10.5 hours in total for the full breakout workshop session referenced.

### Key numeric and scheduling details
- Lecture length for core units: 1.5 hour each.
- Workshop length for core units: 1.5 hours each.
- Unit 12 breakout workshop total: 10.5-hour session in total; preparation takes 9 hours in total in the breakout workshop format.
- Day allocations:
  - Days 1–5 cover core instructional units and workshops.
  - Day 6 includes Unit 11 and initial Unit 12 breakout; Day 7 continues Unit 12 preparation (6 hours); Day 8 concludes presentations (1.5 hours).
  - Day 10 usually reserved for testing, evaluation and course wrap up or continued auxiliary units.
- Subtotal of core units16.523

### Section 2 — module titles, auxiliary materials, instructional time summary
- Module titles and sequencing (verbatim as recorded):
  - F ina nc ia l  Vulne ra b ilitie s   I:  Ta xo no my  a nd   M e a s ure me nt  o f  F ina nc ia l  Ris k s
  - 13. F is c a l  Vulne ra b ility  III:  S to c ha s tic   DS A1.51.5
  - 14. F ina nc ia l  Vulne ra b ility  IV:  S p illo ve rs   a nd   C o nta gio n 1.51.5
  - 15. F is c a l  Vulne ra b ilitie s   IV:  Lo ng- te rm  Ris k s 1.51.5
  - 16. Re a l  S e c to r  Vulne ra b ilitie s   I:  F ina nc ia l  C o nd itio ns 1.51.5
- Auxiliary and customization materials:
  - A.2 for CEF or STI:
  - Other materials relevant for region/customization
  - Subtotal of auxiliary units6
  - Other:
    - Ad minis ra tio n  (o p e ning  b rie f,   e va lua tio n,   c lo s ing):    1.5
    - Tests1
  - Subtotal of other2.5
- Instructional time summary and totals:
  - Subtotal of auxiliary units6
  - Subtotal of other2.5
  - Total2530.5

*Presented by the IMF Institute for Capacity Development (ICD).*

### Section 1

### Course Structure and Standard Syllabus

### Course overview
- Course Topic: Inclusive Growth and Structural Policies
- Course Title: Vulnerability Diagnostics (VDS)
- Course Description:
  - This advanced course, presented by the IMF Institute for Capacity Development (ICD), complements the Macroeconomic Diagnostics (MDS) course by enhancing participants’ ability to assess fiscal, financial, external, and real vulnerabilities in an integrated fashion using lectures, analytical tools, hands-on workshops, and case studies to measure tail (as opposed to central) risks.
- Course Objectives:
  - Identify appropriate measures of fiscal, financial, external, and real vulnerabilities.
  - Describe how vulnerabilities can morph into distress leading to crises as a result of adverse shocks or flawed policies.
  - Use diagnostic tools to track measures of vulnerabilities and predict indicators of tail risks, including tools currently employed in IMF surveillance.
  - Adapt over time diagnostic tools to their country data.
- Target Audience:
  - Officials of all levels in central banks and ministries of finance or other relevant agencies who monitor and assess country and regional vulnerabilities and risks.
- Pre-requisites:
  - Participants should have an advanced degree in economics or equivalent experience, a basic background in econometrics, and some familiarity with the use of software for econometric applications.
  - Some e-learning modules prior to the start of the course will be required—unless one of the following face-to-face or online EdX courses have been taken: Financial Programming and Policies (or FPPx); Macroeconomic Diagnostics (or MDSx); or and Macroeconomic Forecasting (MFx).
- Performance Evaluation:
  - Two multiple-choice tests will be given, one at the beginning of the course and another at the end to ascertain participants’ backgrounds and progress.

### Core and auxiliary topics (structure)
- Core Units (numbered):
  1. Vulnerabilities and Crises
  2. Forecasting Methods for Tail Risks
  3. Fiscal Vulnerabilities I: Assessing Debt Sustainability
  4. Financial Vulnerabilities I: Taxonomy and Measurement of Financial Risks
  5. External Vulnerabilities I: Bond Yields and Sovereign Default Risk
  6. Financial Vulnerabilities II: Detecting Financial Fragility
  7. Fiscal Vulnerability II: Short-term risks
  8. External Vulnerabilities II: Current Account Imbalances
  9. Financial Vulnerabilities III: Financial Cycles, Business Cycles and Systemic Risk
  10. External Vulnerability III: Reserve Adequacy
  11. The IMF’s Vulnerability Exercise
  12. Three Crises: Case Studies
- Auxiliary units (regional customization and advanced tools):
  - Designed to be customized to regions and to expand core units with country-specific examples or more advanced toolkits.
  - Examples (listed as auxiliary units):
    13. Fiscal Vulnerability III: Stochastic DSA
    14. Financial Vulnerability IV: Spillovers and Contagion
    15. Fiscal Vulnerabilities IV: Long-term Risks
    16. Real Sector Vulnerabilities I: Financial Conditions

### Program outline and pedagogy (day-by-day)
- General format:
  - Lectures typically 1.5 hour each.
  - Workshops typically 1.5 hours each.
  - Breakout workshop groups for case study preparation totaling 10.5 hours across Unit 12 preparation sessions.
  - Day ten usually reserved for testing, evaluation and course wrap up.
- DAY 1:
  - UNIT 1: INTRODUCTION TO VULNERABILITIES AND CRISES, AND THE COURSE OVERVIEW
    - Lecture (1.5 hour): Theoretical overview; Vulnerabilities and crises; Structure of the course.
  - UNIT 2: FORECASTING METHODS FOR TAIL RISKS
    - Lecture (1.5 hours): Defining tail risks; VaR measures of tail risks; Logit/Probit models; The signal approach: threshold methods.
    - Workshop (1.5 hours): Predicting Currency Crises via Probit/Logit Regressions.
- DAY 2:
  - UNIT 3: FISCAL VULNERABILITIES I: ASSESSING DEBT SUSTAINABILITY
    - Lecture (1.5 hour): Debt sustainability, debt crisis, and growth; Deterministic DSA in closed and open economies.
    - Workshop (1.5 hours): Assessing debt sustainability: debt-stabilizing primary balance, IMF’s approach to DSA.
  - UNIT 4: FINANCIAL VULNERABILITIES I: TAXONOMY AND MEASUREMENT OF FINANCIAL RISKS
    - Lecture (1.5 hour): Taxonomy of financial risks; Measurement of financial risks.
    - Workshop (1.5 hours): Measurement of risks and introduction to stress testing.
- DAY 3:
  - UNIT 5: EXTERNAL VULNERABILITIES I: BOND YIELDS AND SOVEREIGN DEFAULT RISK
    - Lecture (1.5 hour): From fiscal distress to external crisis; Theory of sovereign default risk; Assessing risks in practice.
    - Auxiliary Workshop (1.5 hours): Explaining Sovereign Bond Interest Rates.
  - UNIT 6: FINANCIAL VULNERABILITIES II: DETECTING FINANCIAL FRAGILITY
    - Lecture (1.5 hour): Overview of stress testing; Single-factor sensitivity analysis; Identifying stress-testing scenarios: Case study.
    - Workshop (1.5 hours): Measurement of risks and introduction to bank stress testing.
- DAY 4:
  - UNIT 7: FISCAL VULNERABILITY II: SHORT-TERM RISKS
    - Lecture (1.5 hour): Risk-based DSA; Interest rate growth differential and public debt; Refined analysis of growth and interest rate shocks.
    - Workshop (1.5 hours): Risk-based DSA, refined analysis of growth and interest rate shocks.
  - UNIT 8: EXTERNAL VULNERABILITIES II: CURRENT ACCOUNT IMBALANCES
    - Lecture (1.5 hour): Current account imbalances; External balance assessment (EBA).
    - Workshop (1.5 hours): External Balance Assessment (EBA) and EBA-Lite applications.
- DAY 5:
  - UNIT 9: FINANCIAL VULNERABILITIES III: FINANCIAL CYCLES, BUSINESS CYCLES AND SYSTEMIC RISK
    - Lecture (1.5 hour): Business cycles and financial cycles; Systemic risk.
    - Workshop (1.5 hours): Financial cycles and banking distress.
  - UNIT 10: EXTERNAL VULNERABILITY III: RESERVE ADEQUACY
    - Lecture (1.5 hour): FX Reserves: definition, composition and trends; Analytics of reserve holdings; Normative assessments of reserve holdings.
    - Workshop (1.5 hours): International Reserves Adequacy.
- DAY 6:
  - UNIT 11: THE IMF’S VULNERABILITY EXERCISES
    - Lecture (1.5 hour): Overview of the VEE; Key indicators and methodologies; Putting it all together and cross sectoral linkages.
    - Workshop (1.5 hours): Putting all Sectors Together and Constructing a Vulnerability Index.
  - UNIT 12: PREPARATION FOR PARTICIPANTS’ PRESENTATIONS
    - Breakout workshop groups (3 hours): Objective is in-depth analysis of crises cases; Preparation for this unit takes 9 hours in total in breakout workshop format; Guidance from counsellors; Group deliverable: Approximately 15 slides and plenary presentations where, if there are three groups, each would have 30 minutes to present, including Q&A.
- DAY 7:
  - UNIT 12: PREPARATION FOR PARTICIPANTS’ PRESENTATIONS (CONTINUED)
    - Breakout workshop groups (6 hours).
- DAY 8:
  - UNIT 12: PARTICIPANTS’ PRESENTATIONS (CONCLUDED)
    - Plenary presentations (1.5 hours); Course wrap up (test, evaluation and closing) or continue with Auxiliary units.
- A.1 For the JVI prior to Unit 12 add from the following Units depending on interests (ending with Unit 12 and course wrap up):
  - UNIT 13: FISCAL VULNERABILITY III: STOCHASTIC DSA
    - Lecture (1.5 hour): Stochastic DSA vs. deterministic DSA; Main steps of stochastic DSA: estimating relationship between DSA inputs, fiscal reaction function, simulations.
    - Workshop (1.5 hours): Stochastic DSA.
- DAY 9:
  - UNIT 14: FINANCIAL VULNERABILITY IV: SPILLOVERS AND CONTAGION
    - Lecture (1.5 hour): Indicators of spillovers; Network analysis; Systemic risk measurement: VaR, CoVaR.
    - Workshop (1.5 hours): VaR, CoVaR, and ∆CoVaR.
  - UNIT 15: FISCAL VULNERABILITIES IV: LONG-TERM RISKS
    - Lecture (1.5 hour): Debt level and fiscal space; Fiscal gaps: full account of government assets and liabilities; Medium- and long-term fiscal adjustment needs.
    - Workshop (1.5 hours): Debt level thresholds; arithmetic of fiscal gaps and long-term adjustment needs.
- DAY 10:
  - UNIT 16: REAL SECTOR VULNERABILITIES I: FROM DOMESTIC AND EXTERNAL FINANCIAL CONDITIONS
    - Lecture (1.5 hour): Tail risk impact on the real economy; Estimating growth at risk from financial prices; Construction of financial conditions index; Aggregating macro financial vulnerabilities.
    - Workshop (1.5 hours): Growth at Risk Toolkit applied to an emerging European economy.
- A.2 For the CEF or STI (or shorter VDS courses):
  - Add regional outlook or pertinent analytical topics (e.g., from REOs) and/or consider other options as per recent offerings.

### Teaching modalities and practical deliverables
- Lecture topics consistently include theoretical foundations, measurement techniques, and IMF-relevant frameworks (e.g., DSA, EBA, ARA metric, stress testing, VEE).
- Workshops focus on applied tools:
  - Probit/Logit regressions, VaR-type measures, ROC analysis, Quantile Regression, stochastic DSA, stress testing, External Balance Assessment (EBA), reserve adequacy metrics (IMF ARA), VaR/CoVaR/∆CoVaR, Growth at Risk toolkit.
- Unit 12 deliverables:
  - Group analysis using terminology/graphs/techniques/spreadsheets learned during the course (e.g., reserve adequacy, EBA, DSA, Stress testing).
  - Approximately 15 slides per group; plenary presentation slots structured so that with three groups each has 30 minutes including Q&A.
- Timing structure:
  - Lectures: 1.5 hour each.
  - Workshops: 1.5 hours each.
  - Unit 12 preparation: 9 hours total across breakout sessions; 10.5 hours in total for the full breakout workshop session referenced.

### Key numeric and scheduling details
- Lecture length for core units: 1.5 hour each.
- Workshop length for core units: 1.5 hours each.
- Unit 12 breakout workshop total: 10.5-hour session in total; preparation takes 9 hours in total in the breakout workshop format.
- Day allocations:
  - Days 1–5 cover core instructional units and workshops.
  - Day 6 includes Unit 11 and initial Unit 12 breakout; Day 7 continues Unit 12 preparation (6 hours); Day 8 concludes presentations (1.5 hours).
  - Day 10 usually reserved for testing, evaluation and course wrap up or continued auxiliary units.
- Subtotal of core units16.523

*Presented by the IMF Institute for Capacity Development (ICD).*

### Section 2

### vds - Section 2

### Module titles and sequencing
- F ina nc ia l  Vulne ra b ilitie s   I:  Ta xo no my  a nd   M e a s ure me nt  o f  F ina nc ia l  Ris k s
- 13. F is c a l  Vulne ra b ility  III:  S to c ha s tic   DS A1.51.5
- 14. F ina nc ia l  Vulne ra b ility  IV:  S p illo ve rs   a nd   C o nta gio n 1.51.5
- 15. F is c a l  Vulne ra b ilitie s   IV:  Lo ng- te rm  Ris k s 1.51.5
- 16. Re a l  S e c to r  Vulne ra b ilitie s   I:  F ina nc ia l  C o nd itio ns 1.51.5

### Auxiliary and customization materials
- A.2 for CEF or STI:
- Other materials relevant for region/customization
- Subtotal of auxiliary units6
- Other:  
  - Ad minis ra tio n  (o p e ning  b rie f,   e va lua tio n,   c lo s ing):    1.5
  - Tests1
- Subtotal of other2.5

### Instructional time summary and totals
- Subtotal of auxiliary units6
- Subtotal of other2.5
- Total2530.5
- Summary of Instructional Time

---


_Source: https://www.imf.org/-/media/files/icd/vds.pdf_