Are Bayesian Fan Charts Useful? The Effect of Zero Lower Bound and Evaluation of Financial Stability Stress Tests

Kód výsledku v 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>

Nalezeny alternativní kódy

RIV/00216208:11230/14:10281692

Výsledek na webu

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DOI - Digital Object Identifier

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Jazyk výsledku

angličtina

Název v původním jazyce

Are Bayesian Fan Charts Useful? The Effect of Zero Lower Bound and Evaluation of Financial Stability Stress Tests

Popis výsledku v původním jazyce

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.

Název v anglickém jazyce

Are Bayesian Fan Charts Useful? The Effect of Zero Lower Bound and Evaluation of Financial Stability Stress Tests

Popis výsledku anglicky

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.

Druh

J_x - Nezařazeno - Článek v odborném periodiku (Jimp, Jsc a Jost)

CEP obor

AH - Ekonomie

OECD FORD obor

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Projekt

<a href="/cs/project/GAP402%2F11%2F1487" target="_blank" >GAP402/11/1487: Měnová politika, finanční stabilita a finanční krize</a><br>

Návaznosti

I - Institucionalni podpora na dlouhodoby koncepcni rozvoj vyzkumne organizace

Rok uplatnění

2014

Kód důvěrnosti údajů

S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Název periodika

International Journal of Central Banking

ISSN

1815-4654

e-ISSN

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Svazek periodika

10

Číslo periodika v rámci svazku

1

Stát vydavatele periodika

US - Spojené státy americké

Počet stran výsledku

33

Strana od-do

159-187

Kód UT WoS článku

000342792200005

EID výsledku v databázi Scopus

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