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

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About: Are Bayesian Fan Charts Useful? The Effect of Zero Lower Bound and Evaluation of Financial Stability Stress Tests Goto Sponge NotDistinct Permalink

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rdf:type	skos:Concept http://linked.opendata.cz/ontology/domain/vavai/Vysledek
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 assumptions employed 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. 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 assumptions employed 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. (en)
Title	Are Bayesian Fan Charts Useful? The Effect of Zero Lower Bound and Evaluation of Financial Stability Stress Tests Are Bayesian Fan Charts Useful? The Effect of Zero Lower Bound and Evaluation of Financial Stability Stress Tests (en)
skos:prefLabel	Are Bayesian Fan Charts Useful? The Effect of Zero Lower Bound and Evaluation of Financial Stability Stress Tests Are Bayesian Fan Charts Useful? The Effect of Zero Lower Bound and Evaluation of Financial Stability Stress Tests (en)
skos:notation	RIV/67985556:_____/14:00395998!RIV15-AV0-67985556
http://linked.open...avai/riv/aktivita	I P
http://linked.open...avai/riv/aktivity	I, P(GAP402/11/1487)
http://linked.open...iv/cisloPeriodika	1
http://linked.open...vai/riv/dodaniDat	2015
http://linked.open...aciTvurceVysledku	Horváth, Roman Baruník, Jozef
http://linked.open.../riv/druhVysledku	J - Článek v odborném periodiku
http://linked.open...iv/duvernostUdaju	S - Úplné a pravdivé údaje nepodléhající ochraně podle zvláštních právních předpisů
http://linked.open...titaPredkladatele	Ústav teorie informace a automatizace AV ČR, v. v. i.
http://linked.open...dnocenehoVysledku	4055
http://linked.open...ai/riv/idVysledku	RIV/67985556:_____/14:00395998
http://linked.open...riv/jazykVysledku	eng - angličtina
http://linked.open.../riv/klicovaSlova	Bayesian vector autoregression; fan chart; inflation targeting; stress tests (en)
http://linked.open.../riv/klicoveSlovo	inflation targeting stress tests Bayesian vector autoregression fan chart
http://linked.open...odStatuVydavatele	US - Spojené státy americké
http://linked.open...ontrolniKodProRIV	[411488E387C5]
http://linked.open...i/riv/nazevZdroje	International Journal of Central Banking
http://linked.open...in/vavai/riv/obor	AH
http://linked.open...ichTvurcuVysledku	2 (xsd:int)
http://linked.open...cetTvurcuVysledku	4 (xsd:int)
http://linked.open...vavai/riv/projekt	Monetary policy, financial stability and financial crisis
http://linked.open...UplatneniVysledku	2014
http://linked.open...v/svazekPeriodika	10
http://linked.open...iv/tvurceVysledku	Horváth, Roman Baruník, Jozef Šmídková, K. Franta, M.
http://linked.open...ain/vavai/riv/wos	000342792200005
issn	1815-4654
number of pages	33 (xsd:int)

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