There has recently been a proliferation of new quantitative tools as part of various initiatives to improve the monitoring of systemic risk. The "SysMo" project takes stock of the current toolkit used at the IMF for this purpose. It offers detailed and practical guidance on the use of current systemic risk monitoring tools on the basis of six key questions policymakers are likely to ask. It provides "how-to" guidance to select and interpret monitoring tools; a continuously updated inventory of key categories of tools ("Tools Binder"); and suggestions on how to operationalize systemic risk monitoring, including through a systemic risk "Dashboard." In doing so, the project cuts across various country-specific circumstances and makes a preliminary assessment of the adequacy and limitations of the current toolkit.

The paper presents a global model with systemic and country risks, as well as commodity prices.We show that systemic risk shocks have an important impact on world economic activity, with the busts in world output gap corresponding to unobserved systemic risk associated with major financial events. In addition, systemic risk shocks are shown to be important drivers of output gaps while country risk premium shocks can have important effects on the trade balance. Commodity prices, in particular the price of oil, are shown to be demand driven. The model performs well at one- and four-quarter horizons compared to a survey of analysts' forecasts. In addition, systemic risk shocks explain a large share of the forecast variance for the world output gap, country output gaps, the price of oil, and country risk premiums. The importance of systemic risk shocks lends support for financial surveillance with a systemic focus.

This textbook provides a comprehensive overview of monetary policy, banking supervision and financial stability in the euro area. The author uses his professional experience in central banking to provide a thorough understanding of European economics and to explore how the monetary and financial system functions. The book takes into account the profound changes that resulted from crisis developments in recent years, such as the implementation of quantitative easing or the establishment of the Single Supervisory Mechanism (SSM). The author also invites readers to develop their thoughts on alternative policies to shape the monetary and financial system of the future. The textbook is tailor-made for intermediate courses in economics but will also appeal to those preparing a career in central banking or financial regulation.

The analysis of interconnectedness and contagion is an important part of the financial stability and risk assessment of a country’s financial system. This paper offers detailed and practical guidance on how to conduct a comprehensive analysis of interconnectedness and contagion for a country’s financial system under various circumstances. We survey current approaches at the IMF for analyzing interconnectedness within the interbank, cross-sector and cross-border dimensions through an overview and examples of the data and methodologies used in the Financial Sector Assessment Program. Finally, this paper offers practical advice on how to interpret results and discusses potential financial stability policy recommendations that can be drawn from this type of in-depth analysis.

Macroprudential policy (MPP) has been one of the major initiatives in the post-2008 crisis restructuring of financial regulation. Under the macroprudential mandate, the regulator monitors and judiciously controls systemic risk in the financial system, in an attempt to minimise the probability and severity of a future financial crisis. The book reveals why MPP authorities are rightfully at the centre of a highly sensitive policy debate, as MPP necessitates the allocation of significant regulatory power to technocrats, while the highly technical nature of MPP makes policy evaluation challenging. Specific issues examined include: the importance of financial stability as a public policy goal; the political economy issues stemming from the delegation of MPP to an independent authority; and the definition of accountability in the context of MPP. Focusing on a case study on the Financial Policy Committee of the Bank of England, the macroprudential authority in the UK, the book develops the normative grounds to justify the need for accountability in the conduct of MPP, while also formulating the necessary institutional framework to ensure the accountability of MPP authorities.