20211109_LargeModelST

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Semi-structural design Equations Example Identification Macroeconomic behavioural equations E.g. country-level GDP depends on country-level loan volumes to the NFPS Country-level structural panel VAR* with long-run priors** Macroeconomic identities E.g. country imports depend on exports of its counterparties Calibration on the basis of trade matrices Aggregating equations Bank-level behavioural equations E.g. country-level loan volumes as a sum of bank level loan volumes E.g. dividend distribution depends on profitability, economic situation, bank capitalisation, riskiness - Bank-level panel estimation: different methods*** incl. dynamic homogeneity where applicable Bank-level regulatory limits E.g. MDA Calibration on the basis of existing regulation Bank-level ‘satellite’ risk models E.g. PDs Bank-level panel estimation: different methods* Bank-level identities E.g. calculation of loan-loss provisions IRFS9 and other balance sheet identities * Jarociński, M. (2010). Responses to monetary policy shocks in the east and the west of Europe: a comparison. Journal of Applied Econometrics, 25(5), 833-868., George, E. I., Sun, D., & Ni, S. (2008). Bayesian stochastic search for VAR model restrictions. Journal of Econometrics, 142(1), 553-580., Waggoner, D. F., & Zha, T. (2003). A Gibbs sampler for structural vector autoregressions. Journal of Economic Dynamics and Control, 28(2), 349-366. ** Villani, M. (2009). Steady‐state priors for vector autoregressions. Journal of Applied Econometrics, 24(4), 630-650. *** Exploring datasets such as SUBA (supervisory reporting), additional supervisory information from STE exercises, iBSI/iMIR, EBA/SSM stress test templates, SNL and other private data providers 6 www.ecb.europa.eu ©
Macro block • The dynamics of economies represented by the structural panel VAR: 12 endogenous: Real Gross Domestic Product Unemployment rate CPI Nominal residential property prices Long-term nominal interest rate Equity price index Import volumes Export prices Bank lending rates Bank loan volumes Short-term money market rates Central bank assets pp YY ii,tt = cc ii + AA ii,jj YY ii,tt−1 + BB ii,jj XX ii,tt + ε i,t jj=1 2 exogenous: Foreign demand Competitor prices 9 structural shocks: Aggregate demand Aggregate supply Conventional monetary policy Unconventional monetary policy Residential housing demand Bond yield Stock price Credit supply Credit demand • Bayesian reduced-form estimator proposed by Jarocinski (2010) with structural shocks derived from sign and zero restrictions along with Arias et al. (2018) • Estimation sample 1999:2019 • Long term priors support model’s convergence to ‘long-run equilibria’ by Villani, M. (2009) 7 www.ecb.europa.eu ©
Page 1 and 2: Large model stress testing Katarzyn
Page 3 and 4: What is the macro-micro model BEAST
Page 5: BEAST* high-level overview 19 euro
Page 9 and 10: Banks' lending volumes Loan demand
Page 11 and 12: Prudential policies • CRDIV capit
Page 13 and 14: Differing simulation properties 13
Page 15 and 16: Perspective at the onset of COVID-1
Page 17 and 18: Narrative based selection GDP growt
Page 19 and 20: Lending impact Impact of policies o
Page 21 and 22: Background • The phase-in of Base
Page 23 and 24: Cost and benefit assessment so far
Page 25 and 26: Initial impact of Basel III finaliz
Page 27 and 28: Debt funding costs after transition
Page 29 and 30: 2021 and three EU Basel III impleme
Page 31 and 32: Plain vanilla design and scenario s
Page 33 and 34: Benefits of EU-specific versus plai
Page 35 and 36: Conclusions: balancing costs and be
Page 37: Q&A 37 www.ecb.europa.eu ©

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