EconStor >
Bank of Canada, Ottawa >
Bank of Canada Working Papers >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/53845
  

Full metadata record

DC FieldValueLanguage
dc.contributor.authorMisina, Miroslaven_US
dc.contributor.authorTessier, Daviden_US
dc.date.accessioned2011-12-15T12:56:44Z-
dc.date.available2011-12-15T12:56:44Z-
dc.date.issued2008en_US
dc.identifier.urihttp://hdl.handle.net/10419/53845-
dc.description.abstractA 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 plausibleā€ 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.en_US
dc.language.isoengen_US
dc.publisherBank of Canada Ottawaen_US
dc.relation.ispartofseriesBank of Canada Working Paper 2008,30en_US
dc.subject.jelC15en_US
dc.subject.jelG21en_US
dc.subject.jelG33en_US
dc.subject.ddc330en_US
dc.subject.keywordFinancial stabilityen_US
dc.subject.stwFinanzmarkten_US
dc.subject.stwNichtlineares Verfahrenen_US
dc.subject.stwStatistische Methodeen_US
dc.titleNon-linearities, model uncertainty, and macro stress testingen_US
dc.typeWorking Paperen_US
dc.identifier.ppn58496742Xen_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen_US
Appears in Collections:Bank of Canada Working Papers

Files in This Item:
File Description SizeFormat
58496742X.pdf226.86 kBAdobe PDF
No. of Downloads: Counter Stats
Show simple item record
Download bibliographical data as: BibTeX

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.