http://www.bis.org/cbhub/list/jel_classification/jel_C15/index.rss Latest research hub papers with the JEL classification:C15 en http://www.dnb.nl/en/publications/dnb-publications/dnb-working-papers-series/dnb-working-papers/working-papers-2012/dnb277032.jsp Netherlands Bank DNB Working Papers by Daniel Kapp The optimal size of the European Stability Mechanism: A cost-benefit analysis 2012-08-27T18:23:00Z This study presents a core-periphery model to determine the optimal size of the European Stability Mechanism (ESM), building on Jeanne and Ranciere (2011). While the periphery is subject to a probability of losing access to external credit, the core's incentive for setting up an ESM stems exclusively from the spillover effects present in the case of periphery default. The model develops regional best response functions, determining a set of feasible ranges for the total ESM size, given optimal regional contributions. The model is then calibrated to the European Economic and Monetary Union. If costs from default are reasonably high, the probability of the periphery not having access to external credit is sufficiently large, and spillover effects to the core are present, both the core and the periphery have an interest in contributing to the ESM. Calibration and sensitivity analysis suggest that the optimal ESM size is between the current and twice the size of the agreed-upon ESM. The optimal size of the European Stability Mechanism: A cost-benefit analysis 2012-08-27T18:23:00Z Abstract http://www.dnb.nl/en/publications/dnb-publications/dnb-working-papers-series/dnb-working-papers/working-papers-2012/dnb277032.jsp Full text http://www.dnb.nl/en/binaries/Working%20Paper%20349_tcm47-277028.pdf Daniel Kapp Daniel Kapp 2012-08-21 Netherlands Bank DNB Working Papers C15 G01 G17 G22 G32 http://www.bcb.gov.br/pec/wps/ingl/wps289.pdf Central Bank of Brazil Working Papers by Luiz A. Pereira da Silva, Adriana Soares Sales and Wagner Piazza Gaglianone Financial Stability in Brazil 2012-08-14T16:12:00Z This paper proposes a working definition for "financial stability" related to systemic risk. Systemic risk is then measured as the probability of disruption of financial services taking into account its time and cross-sectional dimensions and several risk factors. The paper discusses the implications of this definition for Brazil in the aftermath of the recent global financial crisis. A comparison with the United States and the Euro zone is provided. In addition, systemic risk in the Brazilian credit market is investigated given its crucial role as main financial stability driver. Finally, synthetic indicators of systemic risk are used to monitor financial stability. The link between systemic risk and synthetic indicators and/or well-correlated proxies (e.g., a credit-to-GDP gap) allows the calculation of the probability of disruption of the financial system across its time dimension. Therefore, if a Financial Stability Committee and/or the prudential regulator define its tolerance level for "financial stability" as a threshold measured by this probability of disruption, it might have the capability of determining the precise moment when it should strengthen its set of adequate macroprudential responses and policies. Financial Stability in Brazil 2012-08-14T16:12:00Z Abstract http://www.bcb.gov.br/pec/wps/port/wp289.asp?idiom=I Full text http://www.bcb.gov.br/pec/wps/ingl/wps289.pdf Adriana Soares Sales Wagner P. Gaglianone Luiz A. Pereira da Silva Luiz A. Pereira da Silva, Adriana Soares Sales and Wagner Piazza Gaglianone 2012-08 Central Bank of Brazil Working Papers C15 E44 E58 G01 G18 G20 G28 http://www.bundesbank.de/Redaktion/EN/Downloads/Publications/Discussion_Paper_1/2012/2012_03_07_dkp_04.pdf?__blob=publicationFile Deutsche Bundesbank Discussion Papers by Klaus Duellmann, Thomas Kick Stress testing German banks against a global cost-of-capital shock 2012-05-29T12:35:00Z Stress testing German banks against a global cost-of-capital shock 2012-05-29T12:35:00Z Full text http://www.bundesbank.de/Redaktion/EN/Downloads/Publications/Discussion_Paper_1/2012/2012_03_07_dkp_04.pdf?__blob=publicationFile Klaus Düllmann Thomas Kick Klaus Duellmann, Thomas Kick 2012-03-07 Deutsche Bundesbank Discussion Papers C13 C15 G21 G33 http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2012/documento-de-trabajo-13-2012.pdf Central Reserve Bank of Peru Working Papers by Daniel Kapp and Marco Vega The Real Output Costs of Financial Crisis: A Loss Distribution Approach 2012-05-24T06:21:59Z We study cross-country GDP losses due to financial crises in terms of frequency (number of loss events per period) and severity (loss per occurrence). We perform the Loss Distribution Approach (LDA) to estimate a multi-country aggregate GDP loss probability density function and the percentiles associated to extreme events due to financial crises. We find that output losses arising from financial crises are strongly heterogeneous and that currency crises lead to smaller output losses than debt and banking crises. Extreme global financial crises episodes, occurring with a one percent probability every five years, lead to losses between 2.95% and 4.54% of world GDP. The Real Output Costs of Financial Crisis: A Loss Distribution Approach 2012-05-24T06:21:59Z Full text http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2012/documento-de-trabajo-13-2012.pdf Marco Vega Daniel Kapp Daniel Kapp and Marco Vega 2012-05 Central Reserve Bank of Peru Working Papers C15 G01 G17 G22 G32 http://www.bancaditalia.it/pubblicazioni/econo/quest_ecofin_2/QF_120/QEF_120.pdf Bank of Italy Occasional Papers by Michele Leonardo Bianchi and Agostino Chiabrera Italian real estate investment funds: market structure and risk measurement 2012-05-11T17:38:00Z This paper describes the Italian real estate investment funds industry, providing an overview of the distinctive features and risk factors of this sector. By using accounting and supervisory data, we: (1) compute the returns of the real estate assets in the portfolio of these funds; (2) construct a price index and a total return index of the real estate assets held by the Italian funds; (3) define a risk assessment process based on three different aspects - their financial profile, income structure and property price behaviour. This analysis allows us to select funds with a weak financial structure, poor returns, and a high probability that in a three-year interval their property portfolio will fall below their net liabilities (defined as the difference between debt and liquid assets). The proposed risk assessment can be seen as the first step towards a more intensive supervisory analysis and can also be useful for investment purposes. Italian real estate investment funds: market structure and risk measurement 2012-05-11T17:38:00Z Abstract http://www.bancaditalia.it/pubblicazioni/econo/quest_ecofin_2/QF_120 Full text http://www.bancaditalia.it/pubblicazioni/econo/quest_ecofin_2/QF_120/QEF_120.pdf Agostino Chiabrera Michele Leonardo Bianchi Michele Leonardo Bianchi and Agostino Chiabrera 2012-04 Bank of Italy Occasional Papers C15 G10 http://www.dnb.nl/en/binaries/working%20Paper%20342_tcm47-270750.pdf Netherlands Bank DNB Working Papers by Jan Willem van den End and Mark Kruidhof Modelling the liquidity ratio as macroprudential instrument 2012-04-25T12:37:59Z The Basel 3 Liquidity Coverage Ratio (LCR) is a micro prudential instrument to strengthen the liquidity position of banks. However if in extreme scenarios the LCR becomes a binding constraint, the interaction of bank behaviour with the regulatory rule can have negative externalities. We simulate the systemic implications of the LCR by a liquidity stress-testing model, which takes into account the impact of bank reactions on second round feedback effects. We show that a flexible approach of the LCR, in particular one which recognises less liquid assets in the buffer, is a useful macroprudential instrument to mitigate its adverse side-effects during times of stress. At extreme stress levels the instrument becomes ineffective and the lender of last resort has to underpin the stability of the system. Modelling the liquidity ratio as macroprudential instrument 2012-04-25T12:37:59Z Abstract http://www.dnb.nl/en/publications/dnb-publications/dnb-working-papers-series/dnb-working-papers/working-papers-2012/dnb271808.jsp Mark Kruidhof Jan Willem van den End Jan Willem van den End and Mark Kruidhof 2012-04-25 Netherlands Bank DNB Working Papers C15 E44 G21 G28 G32 http://www.dnb.nl/en/publications/dnb-publications/dnb-working-papers-series/dnb-working-papers/working-papers-2012/dnb271808.jsp Netherlands Bank DNB Working Papers by Jan Willem van den End and Mark Kruidhof Modelling the liquidity ratio as macroprudential instrument 2012-04-25T12:37:59Z The Basel 3 Liquidity Coverage Ratio (LCR) is a micro prudential instrument to strengthen the liquidity position of banks. However if in extreme scenarios the LCR becomes a binding constraint, the interaction of bank behaviour with the regulatory rule can have negative externalities. We simulate the systemic implications of the LCR by a liquidity stress-testing model, which takes into account the impact of bank reactions on second round feedback effects. We show that a flexible approach of the LCR, in particular one which recognises less liquid assets in the buffer, is a useful macroprudential instrument to mitigate its adverse side-effects during times of stress. At extreme stress levels the instrument becomes ineffective and the lender of last resort has to underpin the stability of the system. Modelling the liquidity ratio as macroprudential instrument 2012-04-25T12:37:59Z Abstract http://www.dnb.nl/en/publications/dnb-publications/dnb-working-papers-series/dnb-working-papers/working-papers-2012/dnb271808.jsp Full text http://www.dnb.nl/en/binaries/working%20Paper%20342_tcm47-270750.pdf Mark Kruidhof Jan Willem van den End Jan Willem van den End and Mark Kruidhof 2012-04-25 Netherlands Bank DNB Working Papers C15 E44 G21 G28 G32 http://www.norges-bank.no/en/about/published/publications/working-papers/2012/4/ Central Bank of Norway (Norges Bank) Working Papers by Monica Billio Combination schemes for turning point predictions 2012-04-10T17:36:59Z We propose new forecast combination schemes for predicting turning points of business cycles. The combination schemes deal with the forecasting performance of a given set of models and possibly providing better turning point predictions. We consider turning point predictions generated by autoregressive (AR) and Markov-Switching AR models, which are commonly used for business cycle analysis. In order to account for parameter uncertainty we consider a Bayesian approach to both estimation and prediction and compare, in terms of statistical accuracy, the individual models and the combined turning point predictions for the United States and Euro area business cycles. Combination schemes for turning point predictions 2012-04-10T17:36:59Z Abstract http://www.norges-bank.no/en/about/published/publications/working-papers/2012/4/ Monica Billio Monica Billio 2012-04-10 Central Bank of Norway (Norges Bank) Working Papers C11 C15 C53 E37 http://www.bundesbank.de/download/volkswirtschaft/dkp/2012/201204dkp.pdf Deutsche Bundesbank Discussion Papers by Klaus Duellmann, Thomas Kick Stress testing German banks against a global cost-of-capital shock 2012-03-07T12:35:59Z Stress testing German banks against a global cost-of-capital shock 2012-03-07T12:35:59Z Full text http://www.bundesbank.de/download/volkswirtschaft/dkp/2012/201204dkp.pdf Klaus Düllmann Thomas Kick Klaus Duellmann, Thomas Kick 2012-03-07 Deutsche Bundesbank Discussion Papers C13 C15 G21 G33 http://www.federalreserve.gov/pubs/feds/2010/201045/201045pap.pdf Board of Governors of the Federal Reserve System FEDS series by Dobrislav P. Dobrev and Pawel J. Szerszen The Information Content of High-Frequency Data for Estimating Equity Return Models and Forecasting Risk 2010-09-08T10:14:59Z Dobrislav P. Dobrev and Pawel J. Szerszen. We demonstrate that the parameters controlling skewness and kurtosis in popular equity return models estimated at daily frequency can be obtained almost as precisely as if volatility is observable by simply incorporating the strong information content of realized volatility measures extracted from high-frequency data. For this purpose, we introduce asymptotically exact volatility measurement equations in state space form and propose a Bayesian estimation approach. Our highly efficient estimates lead in turn to substantial gains for forecasting various risk measures at horizons ranging from a few days to a few months ahead when taking also into account parameter uncertainty. As a practical rule of thumb, we find that two years of high frequency data often suffice to obtain the same level of precision as twenty years of daily data, thereby making our approach particularly useful in finance applications where only short data samples are available or economically meaningful to use. Moreover, we find that compared to model inference without high-frequency data, our approach largely eliminates underestimation of risk during bad times or overestimation of risk during good times. We assess the attainable improvements in VaR forecast accuracy on simulated data and provide an empirical illustration on stock returns during the financial crisis of 2007-2008. The Information Content of High-Frequency Data for Estimating Equity Return Models and Forecasting Risk 2010-09-08T10:14:59Z Abstract http://www.federalreserve.gov/pubs/feds/2010/201045/201045abs.html Full text http://www.federalreserve.gov/pubs/feds/2010/201045/201045pap.pdf Pawel J. Szerszen Dobrislav Dobrev Dobrislav P. Dobrev and Pawel J. Szerszen 2010-09-01 Board of Governors of the Federal Reserve System FEDS series C11 C13 C14 C15 C22 C53 C80 G17 http://www.newyorkfed.org/research/staff_reports/sr465.pdf New York Fed Staff reports by Torben G. Andersen, Dobrislav Dobrev, and Ernst Schaumburg Jump-Robust Volatility Estimation using Nearest Neighbor Truncation 2010-08-05T06:27:00Z Jump-Robust Volatility Estimation using Nearest Neighbor Truncation 2010-08-05T06:27:00Z Abstract http://www.newyorkfed.org/research/staff_reports/sr465.html Full text http://www.newyorkfed.org/research/staff_reports/sr465.pdf Torben G. Andersen Ernst Schaumburg Dobrislav Dobrev Torben G. Andersen, Dobrislav Dobrev, and Ernst Schaumburg 2010-08 New York Fed Staff reports C14 C15 C22 C80 G10 http://www.banque-france.fr/gb/publications/telechar/ner/ner285.pdf Bank of France Working Papers by Matthieu Lemoine and Christophe Mougin The Growth-Volatility Relationship: New Evidence Based on Stochastic Volatility in Mean Models 2010-07-06T17:40:00Z The Growth-Volatility Relationship: New Evidence Based on Stochastic Volatility in Mean Models 2010-07-06T17:40:00Z Abstract http://www.banque-france.fr/gb/publications/ner/1-285.htm Full text http://www.banque-france.fr/gb/publications/telechar/ner/ner285.pdf Christophe Mougin Matthieu Lemoine Matthieu Lemoine and Christophe Mougin 2010-07 Bank of France Working Papers C15 E32 O40 http://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1205.pdf European Central Bank Working papers by Ken Nyholm, Rositsa Vidova-Koleva Nelson-Siegel, affine and quadratic yield curve specifications: which one is better at forecasting?, 2010-06-25T12:43:59Z In this paper we compare the in-sample fit and out-of-sample forecasting performance of no-arbitrage quadratic and essentially affine term structure models, as well as the dynamic Nelson-Siegel model. In total eleven model variants are evaluated, comprising five quadratic, four affine and two Nelson-Siegel models. Recursive re-estimation and out-of-sample one-, six- and twelve-months ahead forecasts are generated and evaluated using monthly US data for yields observed at maturities of 1, 6, 12, 24, 60 and 120 months. Our results indicate that quadratic models provide the best in-sample fit, while the best out-of-sample performance is generated by three-factor affine models and the dynamic Nelson-Siegel model variants. However, statistical tests fail to identify one single-best forecasting model class. Nelson-Siegel, affine and quadratic yield curve specifications: which one is better at forecasting?, 2010-06-25T12:43:59Z ECB Full text http://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1205.pdf Ken Nyholm Rositsa Vidova-Koleva Ken Nyholm, Rositsa Vidova-Koleva 2010-06-08 European Central Bank Working papers C14 C15 G12 http://www.bportugal.pt/en-US/BdP%20Publications%20Research/wp201011.pdf Bank of Portugal Working papers by Paulo M.M. Rodrigues; Antonio Rubia The Effects of Additive Outliers and Measurement Errors when Testing for Structural Breaks in Variance 2010-06-23T06:29:59Z This paper discusses the asymptotic and finite-sample properties of CUSUM-based tests for detecting structural breaks in volatility in the presence of stochastic contamination, such as additive outliers or measurement errors. This analysis is particularly relevant for financial data, on which these tests are commonly used to detect variance breaks. In particular, we focus on the tests by Inclán and Tiao [IT] (1994) and Kokoszka and Leipus [KL] (1998, 2000), which have been intensively used in the applied literature. Our results are extensible to related procedures. We show that the asymptotic distribution of the IT test can largely be affected by sample contamination, whereas the distribution of the KL test remains invariant. Furthermore, the break-point estimator of the KL test renders consistent estimates. In spite of the good large-sample properties of this test, large additive outliers tend to generate power distortions or wrong break-date estimates in small samples. The Effects of Additive Outliers and Measurement Errors when Testing for Structural Breaks in Variance 2010-06-23T06:29:59Z Abstract http://www.bportugal.pt/en-US/EstudosEconomicos/Publicacoes/Pages/BdPPublicationsResearchDetail.aspx?PublicationId=498 Full text http://www.bportugal.pt/en-US/BdP%20Publications%20Research/wp201011.pdf Paulo M.M. Rodrigues Antonio Rubia Paulo M.M. Rodrigues; Antonio Rubia 2010-06 Bank of Portugal Working papers C12 C15 C52 http://www.bde.es/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/10/Fic/dt1018e.pdf Bank of Spain Working Papers by Thomas Breuer, Martin Jandacka, Javier Menc?a and Martin Summer A systematic approach to multi-period stress testing of portfolio credit risk 2010-06-18T17:44:00Z A systematic approach to multi-period stress testing of portfolio credit risk 2010-06-18T17:44:00Z Abstract http://www.bde.es/informes/be/docs/abs2010e.htm#abs1018e Full text http://www.bde.es/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/10/Fic/dt1018e.pdf Martin Summer Martin Jandacka Thomas Breuer Javier Mencía Thomas Breuer, Martin Jandacka, Javier Menc?a and Martin Summer 2010-06 Bank of Spain Working Papers C15 G20 G28 G32 http://www.bis.org/publ/work308.pdf Bank for International Settlements Working papers by Nikola Tarashev, Claudio Borio and Kostas Tsatsaronis Attributing systemic risk to individual institutions, May 2010 2010-05-17T12:46:59Z An operational macroprudential approach to financial stability requires tools that attribute system-wide risk to individual institutions. Making use of constructs from game theory, we propose an attribution methodology that has a number of appealing features: it can be used in conjunction with popular risk measures, it provides measures of institutions’ systemic importance that add up exactly to the measure of system-wide risk and it easily accommodates uncertainty about the validity of the risk model. We apply this methodology to a number of constructed examples and illustrate the interactions between drivers of systemic importance: size, the institution’s risk profile and strength of exposures to common risk factors. We also demonstrate how the methodology can be used for the calibration of macroprudential capital rules. Attributing systemic risk to individual institutions, May 2010 2010-05-17T12:46:59Z BIS Abstract http://www.bis.org/publ/work308.htm Full text http://www.bis.org/publ/work308.pdf Kostas Tsatsaronis Claudio Borio Nikola A. Tarashev Nikola Tarashev, Claudio Borio and Kostas Tsatsaronis 2010-05 Bank for International Settlements Working papers C15 C71 G20 G28 http://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1175.pdf European Central Bank Working papers by Miguel A. León-Ledesma, Peter McAdam, Alpo Willman, In dubio pro CES - Supply estimation with mis-specified technical change, 2010-04-21T17:40:59Z (JEL: C15, C32, E23, O33, O51) Capital-labor substitution and total factor productivity (TFP) estimates are essential features of growth and income distribution models. In the context of a Monte Carlo exercise embodying balanced and near balanced growth, we demonstrate that the estimation of the substitution elasticity can be substantially biased if the form of technical progress is misspecified. For some parameter values, when factor shares are relatively constant, there could be an inherent bias towards Cobb-Douglas. The implied estimates of TFP growth also yield substantially different results depending on the specification of technical progress. A Constant Elasticity of Substitution production function is then estimated within a “normalized” system approach for the US economy over 1960:1–2004:4. Results show that the estimated substitution elasticity tends to be significantly lower using a factor augmenting specification (well below one). We are able to reject Hicks-, Harrod- and Solow-neutral specifications in favor of general factor augmentation with a non-negligible capital-augmenting component. Finally, we draw some important lessons for production and supply-side estimation. In dubio pro CES - Supply estimation with mis-specified technical change, 2010-04-21T17:40:59Z ECB Full text http://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1175.pdf Alpo Willman Peter McAdam Miguel A. León-Ledesma Miguel A. León-Ledesma, Peter McAdam, Alpo Willman, 2010-04-21 European Central Bank Working papers C15 C32 E23 O33 O51 http://www.bundesbank.de/download/volkswirtschaft/dkp/2009/200931dkp.pdf Deutsche Bundesbank Discussion Papers by Jens Mehrhoff A solution to the problem of too many instruments in dynamic panel data GMM 2009-11-06T12:39:00Z A solution to the problem of too many instruments in dynamic panel data GMM 2009-11-06T12:39:00Z Full text http://www.bundesbank.de/download/volkswirtschaft/dkp/2009/200931dkp.pdf Jens Mehrhoff Jens Mehrhoff 2009-11-06 Deutsche Bundesbank Discussion Papers C13 C15 C23 C81 http://www.bde.es/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/09/Fic/dt0921e.pdf Bank of Spain Working Papers by Fabio Canova, Matteo Ciccarelli and Eva Ortega Do institutional changes affect business cycles? Evidence from Europe 2009-09-24T07:16:59Z Do institutional changes affect business cycles? Evidence from Europe 2009-09-24T07:16:59Z Abstract http://www.bde.es/informes/be/docs/abs2009e.htm#abs0921e Full text http://www.bde.es/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/09/Fic/dt0921e.pdf Eva Ortega Matteo Ciccarelli Fabio Canova Fabio Canova, Matteo Ciccarelli and Eva Ortega 2009-09 Bank of Spain Working Papers C15 C33 E32 E42 http://www.banque-france.fr/gb/publications/telechar/ner/ner245.pdf Bank of France Working Papers by Patrick Fève, Julien Matheron and Jean-Guillaume Sahuc (in French) Minimum Distance Estimation and Testing of DSGE Models from Structural VARs 2009-08-12T12:39:59Z Minimum Distance Estimation and Testing of DSGE Models from Structural VARs 2009-08-12T12:39:59Z Abstract http://www.banque-france.fr/gb/publications/ner/1-245.htm Full text http://www.banque-france.fr/gb/publications/telechar/ner/ner245.pdf Jean-Guillaume Sahuc Julien Matheron Patrick Fève Patrick Fève, Julien Matheron and Jean-Guillaume Sahuc (in French) 2009-08 Bank of France Working Papers C15 C32 E32 http://www.bankofcanada.ca/en/res/wp/2009/wp09-18.pdf Bank of Canada Working papers by Ramdane Djoudad Simulations du ratio du service de la dette des consommateurs en utilisant des données micro 2009-06-04T07:10:59Z The author constructs a formal analytic framework to simulate the impact of various economic shocks on the household debt-service ratio, using data from the Canadian Financial Monitor (CFM) survey. The impact of these shocks on individual households depends on the socio-economic characteristics of the latter. The framework also allows consideration of both symmetric and asymmetric shocks to incomes. The author's work is original in several respects: it captures the heterogeneity of the impact of these shocks on households, it uses cross-sectional data to estimate credit-growth equations, and it determines household credit growth based on income, interest rates, and housing prices. To illustrate the usefulness of his approach, the author provides income, debt, and interest rate scenarios, and then simulates his model over twelve periods. This methodology can, of course, be used with other microdata. Simulations du ratio du service de la dette des consommateurs en utilisant des données micro 2009-06-04T07:10:59Z Abstract http://www.bankofcanada.ca/en/res/wp/2009/wp09-18.html Full text http://www.bankofcanada.ca/en/res/wp/2009/wp09-18.pdf Ramdane Djoudad Ramdane Djoudad 2009-06 Bank of Canada Working papers C15 C31 D14 E51 http://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1051.pdf European Central Bank Working papers by Giovanni Caggiano, George Kapetanios, Vincent Labhard Are more data always better for factor analysis? Results for the euro area, the six largest euro area countries and the UK 2009-05-13T17:38:00Z (JEL: C100, C150, C530) Factor based forecasting has been at the forefront of developments in the macroeconometric forecasting literature in the recent past. Despite the flurry of activity in the area, a number of specification issues such as the choice of the number of factors in the forecasting regression, the benefits of combining factor-based forecasts and the choice of the dataset from which to extract the factors remain partly unaddressed. This paper provides a comprehensive empirical investigation of these issues using data for the euro area, the six largest euro area countries, and the UK. Are more data always better for factor analysis? Results for the euro area, the six largest euro area countries and the UK 2009-05-13T17:38:00Z ECB Full text http://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1051.pdf Giovanni Caggiano George Kapetanios Vincent Labhard Giovanni Caggiano, George Kapetanios, Vincent Labhard 2009-05-13 European Central Bank Working papers C10 C15 C53 http://www.oenb.at/en/img/wp150_tcm16-97771.pdf Austrian National Bank Working Papers by Thomas Breuer, Martin Jandacka, Klaus Rheinberger and Martin Summer How to find plausible, severe, and useful stress scenarios 2009-03-05T15:27:59Z The authors give a precise operational definition to three requirements the Basel Committee on Banking Supervision specifies for stress tests: Plausibility and severity of stress scenarios as well as suggestiveness of risk reducing actions. The basic idea of the authors’ approach is to define a suitable region of plausibility in terms of the risk factor distribution and search systematically for the worst portfolio loss over this region. One key innovation compared to the existing literature is the solution of two open problems. The authors suggest a measure of plausibility that is not prone to the problem of dimensional dependence of maximum loss and they derive a way to consistently deal with situations where some but not all risk factors are stressed. Among the various approaches used for partial scenarios, plausibility is maximised by setting the non stressed risk factors to their conditional expected value given the value of the stressed risk factors. How to find plausible, severe, and useful stress scenarios 2009-03-05T15:27:59Z Abstract http://www.oenb.at/en/presse_pub/research/020_workingpapers/_2009/working_paper_150.jsp#tcm:16-97788 Full text http://www.oenb.at/en/img/wp150_tcm16-97771.pdf Martin Summer Martin Jandacka Thomas Breuer Klaus Rheinberger Thomas Breuer, Martin Jandacka, Klaus Rheinberger and Martin Summer 2009-02-05 Austrian National Bank Working Papers C15 G20 G28 G32 http://www.federalreserve.gov/pubs/ifdp/2008/955/ifdp955.pdf Board of Governors of the Federal Reserve System International Financial Discussion Papers by Daniel O. Beltran and David Draper Estimating the Parameters of a Small Open Economy DSGE Model: Identifiability and Inferential Validity 2008-11-20T07:16:59Z Estimating the Parameters of a Small Open Economy DSGE Model: Identifiability and Inferential Validity 2008-11-20T07:16:59Z Abstract http://www.federalreserve.gov/pubs/ifdp/2008/955/default.htm Full text http://www.federalreserve.gov/pubs/ifdp/2008/955/ifdp955.pdf Daniel O. Beltran David Draper Daniel O. Beltran and David Draper 2008-11 Board of Governors of the Federal Reserve System International Financial Discussion Papers C11 C15 F41 http://www.bankofcanada.ca/en/res/wp/2008/wp08-30.pdf Bank of Canada Working papers by Miroslav Misina and David Tessier Non-Linearities, Model Uncertainty, and Macro Stress Testing 2008-09-24T07:12:00Z A distinguishing feature of macro stress testing exercises is the use of macroeconomic models in scenario design and implementation. It is widely agreed that scenarios should be based on "rare but plausible" events that have either resulted in vulnerabilities in the past or could do so in the future. This requirement, however, raises a number of difficult statistical and methodological problems. Economic models, as well as the statistical models of the relationships among economic variables, generally focus on capturing the average rather than the extreme behaviour, and frequently rely on the assumption of linearity. In this paper we show that these models are particularly ill-suited for stress-testing as they do not adequately capture past behaviour in extreme events, nor do they generate plausible responses to shocks under stress. Whereas one might argue that the use of these models is still preferable to no having no models, since they at least impose the consistency restrictions on the paths generated under the scenario, failing to deal with a large extent of uncertainty of these paths may lead to results that are non-informative, and potentially misleading. The paper illustrates both of these problems by a series of examples, but our conclusions have broader implications for the types of models that would be useful in these exercises. Non-Linearities, Model Uncertainty, and Macro Stress Testing 2008-09-24T07:12:00Z Abstract http://www.bankofcanada.ca/en/res/wp/2008/wp08-30.html Full text http://www.bankofcanada.ca/en/res/wp/2008/wp08-30.pdf Miroslav Misina David Tessier Miroslav Misina and David Tessier 2008-09 Bank of Canada Working papers C15 G21 G33