{
  "title": "Macro-Prudential Stress Test Models: A Survey",
  "publication": "IMF Working Papers, August 25, 2023",
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  "summary": "In this paper, we survey the rapidly developing literature on macroprudential stress-testing models. The scope of the survey includes models of contagion between banks, models of contagion within the wider financial system including non-bank financial institutions such as investment funds, and model",
  "sections": [
    {
      "heading": "Overview",
      "content": "- This paper surveys the rapidly developing literature on macroprudential stress-testing models.\n- The paper's aims are two-fold:\n  - to provide a reference guide of the state-of-the-art for those developing such models;\n  - to distil insights from this endeavour for policy-makers using these models."
    },
    {
      "heading": "Scope",
      "content": "- Includes models of:\n  - contagion between banks;\n  - contagion within the wider financial system including non-bank financial institutions such as investment funds;\n  - models that emphasise the two-way interaction between the financial sector and the real economy."
    },
    {
      "heading": "Modelling frontier: main challenges identified",
      "content": "- (a) our understanding of the potential for amplification in sectors of the non-bank financial system during periods of stress;\n- (b) multi-sectoral models of the non-bank financial system to analyse the behaviour of the overall demand and supply of liquidity under stress;\n- (c) stress testing models that incorporate comprehensive two-way interactions between the financial system and the real economy."
    },
    {
      "heading": "Emerging lessons for policy-makers",
      "content": "- For a given-sized shock hitting the system, its eventual impact will depend on:\n  - (a) the size of financial institutions' capital and liquidity buffers;\n  - (b) the liquidation strategies financial institutions adopt when they need to raise cash;\n  - (c) the topology of the financial network.\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2023/08/25/macro-prudential-stress-test-models-a-survey-537990"
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    "Authors: David Aikman, Daniel Beale, Adam Brinley-Codd, Anne-Caroline Hüser, Giovanni Covi, Caterina Lepore",
    "Published: August 25, 2023",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9798400249921.001",
    "This paper surveys the rapidly developing literature on macroprudential stress-testing models.",
    "The paper's aims are two-fold:",
    "Includes models of:",
    "(a) our understanding of the potential for amplification in sectors of the non-bank financial system during periods of stress;",
    "(b) multi-sectoral models of the non-bank financial system to analyse the behaviour of the overall demand and supply of liquidity under stress;",
    "(c) stress testing models that incorporate comprehensive two-way interactions between the financial system and the real economy.",
    "For a given-sized shock hitting the system, its eventual impact will depend on:",
    "**Working Paper**"
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