Network models, stress testing, and other tools for financial stability monitoring and macroprudential policy design and implementation

Assumptions about decision making and consumer preferences guide programs and products intended to help low-income households achieve healthy outcomes and financial stability. Despite their importance to service design and implementation, these assumptions are rarely stated explicitly, or empirically tested. Some key assumptions may reflect ideas carried over from an earlier era of social-service delivery. Or they may reflect research on decision making by higher income populations that do not hold or have not been tested in a low-income context. This disconnect between assumptions and evidence potentially results in less effective policy design and implementation—at substantial financial and social cost. This piece examines how insights from psychology can help policymakers analyze the core assumptions about behavior that underlie policy outcomes. Three policy areas serve as case studies, to examine some implicit and explicit assumptions about how low-income individuals make decisions under public and nonprofit assistance: banking, nutrition, and housing. Research on preferences and decision making evaluates these foundational assumptions. This perspective provides a unique and under-utilized framework to explain some behavioral puzzles, examine and predict the actions of individuals living in poverty, and understand what are often disappointing program outcomes. Recommendations suggest how psychology and behavioral decision making can impact policy research and design.

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Policy analysis and capacity in the Central Bank of Turkey

Policy Analysis in Turkey ◽

10.1332/policypress/9781447338956.003.0013 ◽

2018 ◽

pp. 215-234

Author(s):

Caner Bakır ◽

Mehmet Kerem Coban

Keyword(s):

Policy Analysis ◽

Central Bank ◽

Financial Stability ◽

Policy Design ◽

Political Capacity ◽

Policy Entrepreneurship ◽

Political Policy ◽

Policy Capacity ◽

Design And Implementation ◽

Analyse Data

This chapter examines policy capacity and policy analysis in the context of the Central Bank’s role in policy design and implementation that relates to macroeconomic and financial stability in Turkey. Specifically, it focuses on agency-level (i.e. individual and organisational) complementarities that relate to the Bank’s policy capacity. These are related to the Bank’s knowledge and expertise, human capital, recruitment, and career development prospects, its ability to collect and analyse data, its formal organisation and departments related to policy analysis, its organisational culture emphasising measured risk taking in policy design and implementation (see also Bakir, 2007, 2012a) and its policy entrepreneurship linking its bureaucratic agenda with governmental agenda due mainly to its strong analytical, operational and political capacity. This chapter argues that proactive behaviour in monetary policy design and implementation is most likely when a central bank has strong analytical, operational and political policy capacity.

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Stress-testing as a method of macroprudential policy and information security in banking sector

SHS Web of Conferences ◽

10.1051/shsconf/20196506004 ◽

2019 ◽

Vol 65 ◽

pp. 06004

Author(s):

Olena Berezina ◽

Iryna Honcharenko ◽

Lesya Berezhna ◽

Valentina Kunchenko-Kharchenko

Keyword(s):

Integrated Assessment ◽

Financial Stability ◽

Stress Testing ◽

Banking Sector ◽

Banking System ◽

Capital Adequacy ◽

Quantitative Risk Assessment ◽

Macroprudential Policy ◽

Prudential Policy ◽

Integral Indicator

The article contains an overview of the essence, history, components, scenarios, methodology and results of stress testing of the Ukrainian banking system. The purpose of this paper is to explore and analyze existing approaches to stress testing as a method of macro-prudential policy of the Central Bank, to determine the results of quantitative risk assessment and financial stability of banks and their readiness to have sufficient capital to cover losses in various macroeconomic scenarios, as well as to develop a model of integrated assessment and rating of banks based on the results of stress testing. In order to summarize the results of the study, a model of integrated assessment was developed and a rating of banks was built based on the analysis of their financial stability, capital adequacy and readiness to withstand the crisis. To solve the problem of qualitative analysis of the stress-testing results in terms of a significant number of indicators and calculations a simulation of the integral indicator is proposed which helps information users group the data, obtain a generalized assessment and form a rating of banks according to the financial stability reserve.

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The Nature of Islamic Banking and Solvency Stress Testing - Conceptual Considerations

IMF Working Papers ◽

10.5089/9781513550886.001 ◽

2020 ◽

Vol 20 (156) ◽

Author(s):

Andreas A. Jobst ◽

Juan Sole

Keyword(s):

Formal Specification ◽

Financial Stability ◽

Stress Testing ◽

Islamic Finance ◽

Islamic Banking ◽

Islamic Banks ◽

Design And Implementation ◽

Regulatory Standards ◽

Key Aspects ◽

Conceptual Overview

This paper provides a conceptual overview of key aspects of the design and implementation of solvency stress testing of Islamic banks. Based on existing regulatory standards and prudential practice, the paper explains how Islamic finance principles and their impact on various risk drivers affect the capital assessment of asset-oriented financial intermediation under stress. The formal specification of these risk factors helps operationalize and integrate the stress testing of Islamic banks within established frameworks for financial stability analysis.

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Macroprudential Policy Instruments of Central Banks

Voprosy Ekonomiki ◽

10.32609/0042-8736-2012-8-32-47 ◽

2012 ◽

pp. 32-47

Author(s):

S. Andryushin ◽

V. Kuznetsova

Keyword(s):

Systemic Risk ◽

Financial Stability ◽

Financial System ◽

Policy Instruments ◽

Central Banks ◽

Macroprudential Policy ◽

Policy Studies ◽

The Future ◽

Financial Cycles

The paper analyzes central banks macroprudencial policy and its instruments. The issues of their classification, option, design and adjustment are connected with financial stability of overall financial system and its specific institutions. The macroprudencial instruments effectiveness is evaluated from the two points: how they mitigate temporal and intersectoral systemic risk development (market, credit, and operational). The future macroprudentional policy studies directions are noted to identify the instruments, which can be used to limit the financial systemdevelopment procyclicality, mitigate the credit and financial cycles volatility.

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