20211109_LargeModelST
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BEAST* high-level overview<br />
19 euro area (25 EU) economies +<br />
Macro block:<br />
ECB-CONFIDENTIAL<br />
• (Structural) VAR representation of each<br />
economy (12 macro-financial variables)<br />
• Additional constraints: cross-border trade<br />
spillovers, common monetary policy<br />
+ 91 (101) significant euro area banks<br />
Bank-level block:<br />
• Detailed representation of a balance sheet:<br />
assets and liabilities<br />
• Detailed representation of profit and loss<br />
accounts e.g. interest income, funding costs<br />
• Reduced-form ‘sensitivity’ equations for e.g.<br />
IRFS9 parameters<br />
• Reduced-form but theory-informed<br />
behavioural equations e.g. lending volumes<br />
• Involves non-linearities and occasionally<br />
binding constraints<br />
* Budnik, K et al. (2020) “Banking euro area stress test model”, ECB Working Paper Series,<br />
No 2469, September<br />
5<br />
www.ecb.europa.eu ©
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