Borio, Claudio; Drehmann, Mathias; Tsatsaronis, Kostas - Bank for International Settlements (BIS) - 2012
We critically review the state of the art in macro stress testing, assessing its strengths and weaknesses. We argue … that, given current technology, macro stress tests are ill-suited as early warning devices, ie as tools for identifying … vulnerabilities during seemingly tranquil times and for triggering remedial action. By contrast, as long as properly designed, stress …