Interdisciplinary Approaches to Systemic Risk Assessment and Macroeconomic Policy
DOI:
https://doi.org/10.71222/njswkq59Keywords:
systemic risk assessment, macroprudential policy, financial stability, network economics, behavioral finance, stress testing methodologyAbstract
This review paper explores the intersection of macroeconomic policy and systemic risk assessment, focusing on the application of interdisciplinary methodologies to enhance our understanding and management of systemic risk in financial systems. Traditional macroeconomic models often fail to adequately capture the complexities of interconnectedness and feedback loops that characterize systemic risk. Therefore, this paper examines how incorporating insights from network science, behavioral economics, and financial econometrics can improve the effectiveness of macroeconomic policies aimed at mitigating systemic risk. It delves into the historical evolution of systemic risk assessment methodologies, contrasting pre-crisis approaches with those developed in response to the 2008 financial crisis and subsequent events. Core themes include the role of macroprudential policies, stress testing frameworks, and early warning indicators in identifying and managing systemic vulnerabilities. The analysis extends to the implementation challenges of these policies and the inherent trade-offs between maintaining financial stability and promoting economic growth. The review thoroughly examines the emerging applications of agent-based modeling and machine learning techniques for simulating complex financial systems and predicting systemic events. Additionally, it provides critical insights into future research directions, emphasizing the development of more robust systemic risk indicators, the integration of climate risk considerations into macrofinancial models, and the refinement of international coordination mechanisms for addressing cross-border systemic risks. This comprehensive review contributes significantly to understanding how interdisciplinary approaches can enhance macroeconomic policy effectiveness in safeguarding financial stability.References
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