Decoding Interdependencies: Applied Macro-Financial Linkage Models Training Course

Introduction

The global financial crisis of 2007-2008 starkly revealed the profound and often complex two-way interdependencies between the real economy and the financial sector. Understanding these macro-financial linkages is no longer a niche area but a core competency for policymakers, regulators, and financial institutions aiming to ensure economic stability and mitigate systemic risks. Shocks originating in the financial markets can severely impact economic activity, while real economic downturns can, in turn, trigger financial distress, creating dangerous feedback loops.

This intensive training course is meticulously designed to equip participants with a comprehensive and practical understanding of the leading models and empirical techniques used to analyze macro-financial linkages. From exploring the theoretical foundations of financial frictions in macroeconomic models to mastering quantitative tools for stress testing, early warning indicators, and macroprudential policy design, you will gain the expertise to identify vulnerabilities and assess systemic risks. This empowers you to contribute to financial stability efforts, develop more robust forecasting frameworks, and navigate the intricate landscape where macroeconomic policy meets financial regulation.

Target Audience

  • Economists and financial stability experts from central banks and ministries of finance.
  • Financial regulators and supervisors.
  • Risk managers and quantitative analysts in commercial banks and financial institutions.
  • Researchers and academics in economics, finance, and financial engineering.
  • Graduate students (Master's and PhD) specializing in macroeconomics, finance, or risk management.
  • Policy advisors involved in macroprudential policy and systemic risk assessment.
  • Investment professionals and strategists needing a deeper understanding of financial market impact on the real economy.
  • Data scientists focusing on financial sector vulnerabilities and economic forecasting.

Duration: 10 days

Course Objectives

Upon completion of this training course, participants will be able to:

  • Understand the theoretical channels through which the financial sector impacts the real economy and vice-versa.
  • Grasp the concept of financial cycles and their interaction with business cycles.
  • Analyze common empirical approaches for identifying and quantifying macro-financial linkages.
  • Comprehend the design and application of stress testing frameworks for financial institutions.
  • Evaluate the role of early warning indicators and financial vulnerability assessments.
  • Develop practical skills in using various models (e.g., VAR, DSGE with financial frictions) for macro-financial analysis.
  • Navigate the implications of macro-financial linkages for monetary, fiscal, and macroprudential policies.
  • Formulate a strategic approach to monitoring financial stability and mitigating systemic risks.

Course Content

  1. Introduction to Macro-Financial Linkages
  • The importance of understanding interdependencies between the real economy and the financial sector
  • Historical context: lessons from financial crises (e.g., 2008 Global Financial Crisis)
  • Key concepts: financial frictions, financial accelerator, systemic risk, procyclicality
  • Two-way linkages: how real shocks affect finance and how financial shocks affect the real economy
  • Overview of different modeling approaches for macro-financial analysis
  1. Theoretical Foundations of Financial Frictions
  • Information asymmetries: adverse selection and moral hazard in financial markets
  • Agency problems and their implications for credit supply
  • Collateral constraints and balance sheet effects
  • External finance premium and its impact on investment
  • Credit channel of monetary policy transmission
  1. Financial Cycles and Business Cycles
  • Identifying financial cycles: credit cycles, asset price cycles
  • Interaction between financial cycles and business cycles: amplification mechanisms
  • Financial booms and busts as sources of macroeconomic instability
  • Empirical evidence on the duration and amplitude of financial cycles
  • Understanding the role of credit growth and asset prices in economic fluctuations
  1. Empirical Analysis of Macro-Financial Linkages: VAR Models
  • Introduction to Vector Autoregression (VAR) models for dynamic relationships
  • Structural VAR (SVAR) for identifying financial shocks and their transmission
  • Financial Conditions Indices (FCIs): construction and interpretation
  • Impulse Response Functions (IRFs) showing cross-sectoral spillovers
  • Using VARs to assess the impact of financial shocks on GDP, inflation, etc.
  1. Stress Testing Financial Systems
  • What is stress testing? Purpose and types (top-down, bottom-up)
  • Macroeconomic scenarios for stress tests: designing severe but plausible shocks
  • Transmission of shocks to financial institutions: credit risk, market risk, liquidity risk
  • Aggregation of individual institution results to assess systemic impact
  • Challenges in stress testing: data availability, model complexity, feedback loops
  1. Early Warning Indicators and Financial Vulnerability Analysis
  • Identifying financial vulnerabilities: overheating credit markets, asset price bubbles, currency mismatches
  • Construction and evaluation of early warning indicators (EWIs) for financial crises
  • Composite indicators and dashboards for monitoring financial stability
  • Heat maps and risk matrices for assessing systemic risk
  • Granular data analysis for specific sectors or institutions
  1. Macroeconomic Models with Financial Frictions (DSGE and others)
  • Introduction to Dynamic Stochastic General Equilibrium (DSGE) models with financial sectors
  • Incorporating banking sectors, credit intermediation, and financial accelerator mechanisms into DSGE
  • Policy analysis using financial DSGE models (e.g., impact of capital requirements, liquidity regulations)
  • Agent-Based Models (ABMs) for understanding systemic risk (conceptual overview)
  • Stock-flow consistent (SFC) models for financial accounting consistency
  1. Macroprudential Policy: Design and Implementation
  • Objectives of macroprudential policy: mitigating systemic risk, leaning against the wind
  • Key macroprudential tools: capital buffers (e.g., countercyclical capital buffer), loan-to-value (LTV) limits, debt-to-income (DTI) limits
  • Effectiveness and unintended consequences of macroprudential policies
  • Interactions between macroprudential, monetary, and fiscal policies
  • Institutional frameworks for macroprudential policy
  1. Sovereign-Bank Nexus and International Linkages
  • The interdependency between sovereign risk and banking sector stability
  • How sovereign stress can transmit to banks and vice-versa
  • Analyzing cross-border financial spillovers and contagion
  • Role of global financial cycles in domestic financial stability
  • Policy challenges in managing international macro-financial linkages
  1. Case Studies and Emerging Issues
  • Analyzing specific historical financial crises through a macro-financial lens
  • Current macro-financial challenges: climate-related financial risks, cyber risks, crypto assets
  • The impact of FinTech on macro-financial stability
  • Data gaps and research frontiers in macro-financial modeling
  • Best practices for integrating macro-financial analysis into policymaking and risk management.

CERTIFICATION

  • Upon successful completion of this training, participants will be issued with Macskills Training and Development Institute Certificate

TRAINING VENUE

  • Training will be held at Macskills Training Centre. We also tailor make the training upon request at different locations across the world.

AIRPORT PICK UP AND ACCOMMODATION

  • Airport pick up and accommodation is arranged upon request

TERMS OF PAYMENT

Payment should be made to Macskills Development Institute bank account before the start of the training and receipts sent to info@macskillsdevelopment.com

For More Details call: +254-114-087-180

 

 

Decoding Interdependencies: Applied Macro-financial Linkage Models Training Course in Kenya
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