Systemic Risk, Policies, and Data Needs
The study of financial system stability is of fundamental importance in modern economies. The failure or distress experienced by systemically important financial institutions can have contagious effects on the rest of the financial system. This may in turn result in deteriorating macroeconomic conditions and price instability, with negative consequences and spillover effects to other sectors of the real economy. This tutorial surveys the different approaches to systemic risk modeling put forward by the academic and practitioner literature. We review the methodologies, with a focus on the relevant economic forces in play and the mechanisms leading to systemic instabilities. We discuss macroprudential, monetary and resolution policies targeting financial stability. We report the supervisory authorities of the different financial institutions, as well as the current barriers to data sharing.