02029cas a2200253 a 4500 AALejournalIMF016393 230101c9999 xx r poo 0 0eng d 5.00 USD 9781513534916 1018-5941 BD-DhAAL BD-DhAAL Catalan, Mario. When Banks Punch Back : Macrofinancial Feedback Loops in Stress Tests / Mario Catalan, Alexander Hoffmaister. Washington, D.C. : International Monetary Fund, 2020. 1 online resource (65 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students In the presence of adverse macroeconomic shocks, simultaneous capital losses in multiple banks can prompt them to contract their balance sheets. These bank responses generate externalities that propagate in the form of macro-financial feedback loops. This paper develops a credit response and externalities analysis model (CREAM) that integrates a disaggregated banking sector into an otherwise standard macroeconomic structural vector autoregressive model. It shows that accounting for macro-financial feedback loops can significantly affect macroeconomic outcomes and bank-specific stress tests results. The heterogeneity in bank lending responses matters: it determines how each bank fares under adverse conditions and the external effects that banks impose on each other and on economic activity. The model can thus be used to assess the contributions of individual banks to systemic risk along the time dimension. Mode of access: Internet Hoffmaister, Alexander. IMF Working Papers; Working Paper ; No. 2020/072 Full text available on IMF http://elibrary.imf.org/view/journals/001/2020/072/001.2020.issue-072-en.xml IMF e-Library