Are Bayesian Fan Charts Useful? The Effect of Zero Lower Bound and Evaluation of Financial Stability Stress Tests
The result's identifiers
Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F67985556%3A_____%2F14%3A00395998" target="_blank" >RIV/67985556:_____/14:00395998 - isvavai.cz</a>
Alternative codes found
RIV/00216208:11230/14:10281692
Result on the web
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DOI - Digital Object Identifier
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Alternative languages
Result language
angličtina
Original language name
Are Bayesian Fan Charts Useful? The Effect of Zero Lower Bound and Evaluation of Financial Stability Stress Tests
Original language description
We show how fan charts generated from Bayesian vector autoregression models can be useful for assessing 1) the effect of the zero lower bound constraint on forecasting uncertainty and 2) the credibility of stress tests conducted to evaluate financial stability. To illustrate these issues, we use a data set for the Czech Republic and macroeconomic scenarios used by the Czech National Bank in stress tests of the banking sector. Our results demonstrate how different modeling approaches to the zero lower bound affect the resulting fan charts. The pros and cons of the considered methods are discussed; ignoring the zero lower bound constraint represents the worst approach. Next, using our fan charts, we propose a method for evaluating whether the assumptionsemployed in the bank?s stress tests regarding the macroeconomic outlook are sufficiently adverse and consistent with past cross-correlations observed in data. We find that CNB stress tests are sufficiently conservative in this respect.
Czech name
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Czech description
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Classification
Type
J<sub>x</sub> - Unclassified - Peer-reviewed scientific article (Jimp, Jsc and Jost)
CEP classification
AH - Economics
OECD FORD branch
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Result continuities
Project
<a href="/en/project/GAP402%2F11%2F1487" target="_blank" >GAP402/11/1487: Monetary policy, financial stability and financial crisis</a><br>
Continuities
I - Institucionalni podpora na dlouhodoby koncepcni rozvoj vyzkumne organizace
Others
Publication year
2014
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů
Data specific for result type
Name of the periodical
International Journal of Central Banking
ISSN
1815-4654
e-ISSN
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Volume of the periodical
10
Issue of the periodical within the volume
1
Country of publishing house
US - UNITED STATES
Number of pages
33
Pages from-to
159-187
UT code for WoS article
000342792200005
EID of the result in the Scopus database
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