This paper presents first steps toward robust models for crisis prediction. We conduct a horse race of conventional statistical methods and more recent machine learning methods as early-warning models. As individual models are in the literature most often built in isolation of other methods, the...

This paper documents the extension of the system-wide stress testing framework of the ECB with the insurance sector for a more thorough assessment of risks to financial stability. The special nature of insurers is captured by the modelling of the liability side and its loss absorbing capacity of...

We empirically analyze the interaction of monetary policy with financial stability and the real economy in the euro area. For this, we apply a quantile vector autoregressive model and two alternative estimation approaches: simulation and local projections. Our specifications include monetary...

The main result in Svensson (2017) and its previous versions is that, given current knowledge and empirical estimates, the cost of using monetary policy to "lean against the wind" for financialstability purposes exceeds the benefit by a substantial margin. Adrian and Liang (2016a) conduct a...

This paper uses representative individual household data from Luxembourg to evaluate how severe economic conditions could affect bank exposure to the household sector. Information on household income, expenses and liquid assets are used to calculate household-specific probabilities of default...

Using household survey data, we document evidence of a loosening of credit standards in Euro area countries that experienced a property price boom-and-bust cycle. Borrowers in these countries exhibited significantly higher loan-to-value (LTV) and loan-to-income (LTI) ratios in the run up to the...

This paper explores monetary-macroprudential policy interactions in a simple, calibrated New Keynesian model incorporating the possibility of a credit boom precipitating a financial crisis and a loss function reflecting financial stability considerations. Deploying the countercyclical capital...

Traditionally, insurers are seen as stabilisers of financial markets that act countercyclically by buying assets whose price falls. Recent studies challenge this view by providing empirical evidence of procyclicality. This paper sheds new light on the underlying reasons for these opposing views....

We develop early warning models for financial crisis prediction by applying machine learning techniques to macrofinancial data for 17 countries over 1870-2016. Most nonlin-ear machine learning models outperform logistic regression in out-of-sample predictions and forecasting. We identify...

This paper identifies the various channels that give rise to a "sovereign-bank nexus" whereby the financial health of banks and sovereigns is intertwined. We find that banks and sovereigns are linked by three interacting channels: banks hold large amounts of sovereign debt; banks are protected...