| Abstract: |
As financial stability has gained focus in economic policymaking, the demand
for analyses of financial stability and the consequences of economic policy
has increased. Alternative macroeconomic models are available for policy
analyses, and this paper evaluates the usefulness of some models from the
perspective of financial stability. Financial stability analyses are
complicated by the lack of a clear and consensus definition of ‘financial
stability’, and the paper concludes that operational definitions of this term
must be expected to vary across alternative models. Furthermore, since
assessment of financial stability in general is based on a wide range of risk
factors, one can not expect one single model to satisfactorily capture all the
risk factors. Rather, a suite of models is needed. This is in particular true
for the evaluation of risk factors originating and developing inside and
outside the financial system respectively. |