## The Real Effects of Financial Sector Risk

_IMF Working Papers, September 1, 2009_

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**Canonical URL:** [The Real Effects of Financial Sector Risk](https://www.imf.org/en/publications/wp/issues/2016/12/31/the-real-effects-of-financial-sector-risk-23275)

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## Bibliographic details
- Authors: Andrea M. Maechler, Alexander F. Tieman
- Published: September 1, 2009
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451873450.001

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### Summary and main findings
- The paper estimates the magnitude of key effects on the real economy from financial sector stress.
- Focus is on the short-run feedback effect from market-based indicators of financial sector risk to the real economy through the credit channel.
- Estimates are produced at two levels:
  - Economy-wide (macro) level.
  - Individual large banks.
- Both sets of estimates yield significant feedback effects of substantial magnitude.
- The estimates are consistent with other work in this area.

### Policy implications and recommendations
- Prudential supervision could be enhanced by taking into account the feedback effects of financial instability on the real economy.
- Proposes a way to integrate feedback effects into stress tests to:
  - Improve realism of macroeconomic stress scenarios.
  - Improve accuracy of macroeconomic stress scenarios.
- Proposes a metric to interpret stress testing results.

### Subject areas and keywords
- Subject: Bank credit, Banking, Credit, Financial sector, Financial sector risk
- Keywords: bank, credit growth, GDP, WP

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/the-real-effects-of-financial-sector-risk-23275_