A1314
Title: Simulating macro-financial scenarios of stress for multiple countries in the euro area
Authors: Katrin Assenmacher - European Central Bank (Germany) [presenting]
Marcel Brautigam - European Central Bank (Germany)
Juan Manuel Figueres - European Central Bank (Germany)
Carla Giglio - European Central Bank (Germany)
Alberto Grassi - European Central Bank (Germany)
Costanza Rodriguez - European Central Bank (Germany)
Abstract: The purpose is to design an econometric framework to simulate macro-financial scenarios of stress for the four main economies of the euro area. In doing so, a flexible model framework consisting of two blocks is proposed. First, financial shocks are generated via a non-parametric copula estimated on a large dataset of daily financial indicators, which allows generating an index of financial conditions that is used to simulate financial stress events. Second, the joint dynamics of macroeconomic indicators conditional on the copula-based financial shocks in a large multi-country Bayesian VAR model are simulated. Preliminary results show that the proposed framework allows replicating different macro-financial stress scenarios where adverse shocks generated in the financial sector propagate into the overall economy, triggering significant fluctuation in key macroeconomic indicators.
