The Taylor (1993) rule for determining interest rates is generalized to account for three additional variables: The money supply, money velocity, and the unemployment rate. Thus, five parameters, i.e. weights assigned to the deviation in the inflation rate, the deviation in real GDP (Gross...

This paper proposes and demonstrates a methodology for modeling correlated systemic solvency and liquidity risks for a banking system. Using a forward looking simulation of many risk factors applied to detailed balance sheets for a 10 bank stylized United States banking system, we analyze...