Syllabus
A preliminary syllabus - subject to changes
Financial crises: anatomy, causes, consequences
Risk assessment of the banking sector
Sovereign risk
Macro-financial linkages and systemic risk
Cross-border interconnectedness and interbank contagion
Measuring financial cycle
Stress testing
Constructing early warning systems
Macroprudential policy: Capital-based tools
Macroprudential policy: Borrower-based tools
Systemically Important Financial Institutions
Guest Lecture
Annotation
At least since early 1990s, economists acknowledge that a stable financial system is a key precondition for a sound economic and financial development and that policies need to be implemented for maintaining financial stability and reducing the risk of financial crises. Since the Global Financial Crisis 2008/2009, this risk has been newly labeled "systemic risk" and policies to mitigate it were established under a new term "macroprudential". As of today, almost all central banks have added financial stability and mitigation of systemic risk among their main objectives along price stability.
The course discusses in depth the concept of systemic risk in the financial system, its accumulation and materialization over the financial cycle, and ways how to mitigate it using macroprudential policy tools. In the first half, the course will review key sources of systemic risk stemming from developments in the real economy, asset markets (such as real estate markets), or financial sector; present approaches to measure it; and demonstrate how early warning systems and other analytical approaches to monitor risks to financial stability are constructed. In the second half, it will explore how various macroprudential policy instruments - reaching from Basel III countercyclical capital buffer up to limits on LTV/DSTI - are calibrated and used in practice by central banks.