Systemic Macro-Financial Risk Analysis
INTRODUCTION
This course provides a comprehensive overview of the theories, tools, and techniques necessary for thorough financial stability analysis. It attempts to identify the indicators that can demonstrate the vulnerabilities in systemically important financial institutions by:
(i) investigating the differences between the intervened and nonintervened financial institutions during the subprime crisis with balance sheet data; and
(ii) detecting the domestic/global macroeconomic and financial driving factors of financial institutions’ expected default frequencies with panel specifications and panel co-integration techniques. it finds that: (a) basic leverage, return on assets, provision for loan losses, equity prices, and business scope can help identify the differences between the intervened and non-intervened financial institutions;(b) the expected default frequencies reacts positively to shocks to basic leverage, inflation, global financial stress, and global excess liquidity, while negatively to return on assets and equity prices; and
(iii) basic leverage has been the most robust factor with a long-run causal effect on the expected default frequencies
Course Objectives
- Explain how to use balance sheet and market data to construct risk indicators to measure and monitor sector and systemic risk.
- Summarize the tools and data needed for thorough monitoring of systemic risk.
- Define data inputs, outputs, and applications of several types of systemic risk models, their pros and cons, and how they relate to one other.
- Build models that relate macro variables to the time series of risk indicators.
Target Group
Officials from financial stability/macroprudential analysis departments in central banks, supervisory agencies, and ministries of finance