Nationaløkonomisk tidsskrift,
Nationaløkonomisk Forening

Abstract: The macro stress tests used by the authorities in many countries prior to the most recent financial crisis did not pay sufficient attention to low-probability but high-consequence scenarios. Economic history is rich on extreme events which we illustrate by taking a closer look at the frequency and magnitude of extreme events in the economic history of Denmark. We suggest using distributions of macro-financial risk factors based on long-span historical time series as inspiration in relation to low-probability scenarios in macro stress tests.

Keywords: macro-finance

JEL-codes: A10

Language: English

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