This paper illustrates that ?nancial conditions are not simply a re?ection of macroeconomic developments. In fact, one feeds the other, and both are mutually dependent. Adverse ?nancial conditions have the potential to exacerbate negative disturbances on the real economy| converting the initial...

We propose a measure for systemic risk: CoVaR, the value at risk (VaR) of financial institutions conditional on other institutions being in distress. We define an institution's (marginal) contribution to systemic risk as the difference between CoVaR and the financial system's VaR. From our...