Stress testing, at its most general level, is an investigation of the performance of an entity under abnormal operating conditions. The authors focus on one set of entities — the Canadian banking sector — and investigate losses in the loans portfolio of this sector as a function of changing...

Since Kydland and Prescott published their famous article on rules versus discretion in 1977, the literature on the time-inconsistency problem of economic policy expanded rapidly. While much of the literature is highly technical and can seem esoteric, there is generally an underlying...