We operationalize the definition of systemic risk provided by the IMF, BIS, and FSB and derive testable hypotheses to identify indicators of systemic risk. We map these hypotheses into a two-stage hierarchical test which combines insights from the early-warning literature on financial crises...

Over the recent months, several initiatives have taken place to develop macro-prudential regulation in order to prevent systemic risk and the built-up of financial imbalances. Crucial to the success of such policy is the ability of the macro-prudential authority to identify in due time such...

Over the Great Moderation period in the United States, we find that corporate credit spreads embed crucial information about the one-year-ahead probability of recession, as evidenced by both in-and out-of-sample fit. Furthermore, the incidence of false positive predictions of recession is...

The question of what is the economic environment that is most likely to anticipate a recession is still open, as the literature has emphasized either the importance of deteriorating financial conditions and that of worsening macroeconomic indicators. Using a probit forecasting model, we show...

A reflection on the lackluster growth over the decade since the Global Financial Crisis has renewed interest in preventative measures for a long-standing problem. Advances in machine learning algorithms during this period present promising forecasting solutions. In this context, the paper...

This paper builds and estimates a small open economy New Keynesian DSGE model, specified with an international banking sector, in order to explore the effectiveness of alternative monetary police regimes to isolate the domestic economy from global financial cycles. Using an increase to the...

Financial stability indicators can be grouped into financial stress indicators that reflect heightened spreads and market volatility, and financial vulnerability indicators that reflect credit and asset price imbalances. Based on a panel of euro area countries, we show that both types of...

We propose a novel empirical approach to inform monetary policymakers about the potential effects of policy action when facing trade-offs between financial and macroeconomic stability. We estimate a quantile vector autoregression (QVAR) for the euro area covering the real economy, monetary...

We propose a novel empirical approach to inform monetary policymakers about the potential effects of policy action when facing trade-offs between financial and macroeconomic stability. We estimate a quantile vector autoregression (QVAR) for the euro area covering the real economy, monetary...

Is there a link between loose monetary conditions, credit growth, house price booms, and financial instability? This paper analyzes the role of interest rates and credit in driving house price booms and busts with data spanning 140 years of modern economic history in the advanced economies. We...