IMF Working Papers

Systemwide Liquidity Stress Testing Tool

By Hiroko Oura

December 16, 2022

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Format: Chicago

Hiroko Oura. Systemwide Liquidity Stress Testing Tool, (USA: International Monetary Fund, 2022) accessed November 5, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Developing a systemic liquidity stress testing tool is challenging due to data constraints and hard-to-model behavioral factors. There has yet to be a uniformly accepted model partly because the nature of systemic liquidity risks differs significantly across countries. This paper offers a simple Excel-based tool to assess the high-level impact of aggregate liquidity stress on the whole economy and gauge its spillover across banks, non-bank financial institutions (NBFIs), and non-financial economic sectors. It primarily uses the balance sheet approach (BSA) data—a sector-aggregate matrix of financial exposure by counterpart—that have become increasingly available for various economies with all income levels. The results can identify systemically important financial linkages to be analyzed further and help calibrate macroprudential measures and a liquidity support framework. When liquidity stress stems from capital outflows, the tool can enrich policy discussion based on integrated policy framework (IPF) and international reserve adequacy perspectives.

Keywords: Balance sheet approach, Capital flow, Financial stability, Integrated policy framework, Interconnectedness, International reserve adequacy, Macroprudential policy, NBFIs, Stress test, Systemic liquidity

Publication Details

  • Pages:

    54

  • Volume:

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  • DOI:

    ---

  • Issue:

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  • Series:

    Working Paper No. 2022/252

  • Stock No:

    WPIEA2022252

  • ISBN:

    9798400227585

  • ISSN:

    1018-5941

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