The sovereign debt crisis in the euro area has increased the interest in early warning indicators, with the aim to indicate the build up of fiscal stress early on and to facilitate crisis prevention by a timely counteraction of fiscal and macroeconomic policies. This paper presents possible...

This paper builds a macro-prudential tool designed to assess whether the banking sector is adequately prepared to orderly withstand losses resulting from normal or stressed macroeconomic and micro-economic scenarios. The link between the banking sector and the real sector is established via the...

This paper proposes a general statistical framework for systemic financial stress indices which measure the severity of financial crises on a continuous scale. Several index designs from the financial stress and systemic risk literature can be represented as special cases. We introduce an...

We propose a novel empirical approach to inform monetary policymakers about the potential effects of policy action when facing trade-offs between financial and macroeconomic stability. We estimate a quantile vector autoregression (QVAR) for the euro area covering the real economy, monetary...

The paper studies the central bank collateral framework and its impact on banks’ liquidity under an adverse stress test scenario. We construct a stress test model that accounts for a granular and multi-faceted representation of the liquidity of marketable and non-marketable assets. In...

I show that the detrending of financial variables with the Hodrick and Prescott (1981, 1997) (HP) and band-pass filters leads to spurious cycles. I find that distortions become especially severe when considering medium-term cycles, i.e., cycles that exceed the duration of regular business...

Should monetary policy lean against financial stability risks? This has been a subject of fierce debate over the last decades. We contribute to the debate about “leaning against the wind” (LAW) along three lines. First, we evaluate the cost and benefits of LAW using the Svensson (2017)...

This paper uses data on bilateral foreign exposures of domestic banking systems in order to construct early warning models for financial crises that take into account cross-country spill-overs of vulnerabilities. The empirical results show that incorporating cross-country financial linkages can...

This paper explores monetary-macroprudential policy interactions in a simple, calibrated New Keynesian model incorporating the possibility of a credit boom precipitating a financial crisis and a loss function reflecting financial stability considerations. Deploying the countercyclical capital...