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September 10, 2025IMF Working PaperOpen Access

Financial Imbalances, Systemic Stress, and Macroprudential Implications

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Authors

KAKnarik AyvazyanÉYÉtienne B. Yehoue

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Overview

This research presents a new Systemic Vulnerabilities Index, providing evidence of its effectiveness in detecting financial imbalances and informing macroprudential actions.

Key Points

  • The Systemic Vulnerabilities Index outperforms traditional credit-to-GDP measures in tracking systemic risks.
  • Using Principal Component Analysis and Monte Carlo simulations, the SVI is optimized to predict credit losses effectively.
  • The findings indicate a negative correlation between the SVI and financial condition index, suggesting financial loosening increases risks.
  • A systematic framework using the SVI enhances the timing and magnitude of Countercyclical Capital Buffer adjustments.

Cite This Study

Ayvazyan et al. (2025) studied this question.

synapsesocial.com/papers/68c1b36054b1d3bfb60ea7d7https://doi.org/10.5089/9798229016919.001
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