Turning stress tests into a useful tool for assessing system-wide risk requires the following: (1) incorporating general equilibrium dimensions, so that the outcome of the test depends not only on the size of the shock and the initial buffers of individual institutions, but also on their...

Giving stress tests a macroprudential perspective requires (i) incorporating general equilibrium dimensions, so that the outcome of the test depends not only on the size of the shock and the buffers of individual institutions but also on their behavioral responses and their interactions with...