Financial Sector Projections and Stress Testing in Financial Programming: A New Framework

By Antonio Garcia Pascual, Nada Choueiri, Ritu Basu

January 1, 2006

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Antonio Garcia Pascual, Nada Choueiri, and Ritu Basu. Financial Sector Projections and Stress Testing in Financial Programming: A New Framework, (USA: International Monetary Fund, 2006) accessed November 12, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper proposes a framework to check for consistency between the IMF's standard country surveillance tool, namely medium-term projections of the macroeconomic framework (including the real, fiscal, external, and monetary sectors), and the financial sector. Consistency here entails that the financial sector remain solvent in the medium term under the assumptions of the macroeconomic framework and that the macroeconomic framework is fine-tuned should threats to financial sector solvency arise as a result of assumptions underlying the medium-term macroeconomic framework projections. The proposed framework can also be used to conduct sensitivity analysis of the aggregated financial sector to various types of risks, including foreign exchange, interest rate, and credit risk. For surveillance purposes, this framework can easily be integrated into one of the standard sectoral files so that any update to the macroeconomic framework automatically feeds into the financial sector medium-term projections. We anticipate the proposed framework to be of interest to IMF economists as well as outside analysts.

Subject: Banking, Commercial banks, Financial sector, Foreign assets, Macroeconomic and fiscal forecasts

Keywords: Asset, Balance sheet, Central bank, Profit and loss, WP

Publication Details

Pages:

29
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2006/033
Stock No:

WPIEA2006033
ISBN:

9781451862935
ISSN:

1018-5941

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