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Models for analysing financial stability

Norges Bank Financial Stability develops models for analysing and assessing various types of risk that may affect the stability of the financial system.

Models based on microdata:

Sebra (System for EDB-based Accounting Analysis): This model has been developed to permit assessment of the credit risk associated with banks' loans to Norwegian enterprises. The model has been estimated using primarily data from enterprise accounts, and it determines the probability of bankruptcy of each individual enterprise.

• Model for analysing credit risk in the enterprise sector (pdf, 492 kB)
  by Trond Eklund, Kai Larsen and Eivind Bernhardsen in Economic Bulletin 3/2001.
• A model of bankruptcy prediction (pdf, 493 kB)
  by Eivind Bernhardsen (Norges Bank Working Paper 10/2001).
• The credit risk model
  Description of the credit risk model: Box in Financial Stability 1/2001 (p. 25)

Bank model: This model is a description of banks' accounts. The model is used to assess the direct effects on these accounts of changes in relevant factors. The model does not take account of changes in banks' behaviour which, along with any indirect effects, could also modify or amplify the direct effects.

• Scenarios for banks
  The bank model is used in Chapter 3.3 of Financial Stability 2/2005.

Models based on macrodata:

Sub-model for financial stability: Norges Bank has developed a macro model system for forecasting and policy analysis. This system consists of a core model and associated sub-models. One of the sub-models includes factors of particular importance to the assessment of financial stability, and how these factors relate to macroeconomic developments. This sub-model is used to assess the consequences of monetary policy decisions for financial stability.

Model for stress testing: A small macromodel for the Norwegian economy is adjusted to analyse how macroeconomic downturns affect financial stability. The model focuses on credit risk, i.e. on banks' losses.

• An analysis of banks' problem loans
  by Tor Oddvar Berge and Katrine Godding Boye in Economic Bulletin 2/2007
• Housing investment and house prices
  by Dag Henning Jacobsen, Kristin Solberg-Johansen and Kjersti Haugland in Economic Bulletin 1/2007
• Measuring and predicting household housing wealth (pdf, 116 kB)
  by Tor O. Berge, Katrine Godding Boye, Dag Henning Jacobsen, Kjersti-Gro Lindquist and Marita Skjæveland in Norges Bank Staff Memo 4/2006
• Long term real interest rates and house prices (pdf, 77 kB)
  Box in Financial Stability 1/2006 (p. 23)
• Development in house prices (pdf, 4 262 kB)
  Box in Financial Stability 2/2005 (pp. 22-23)
• What influences the number of bankruptcies? (pdf, 1 115 kB)
  by Dag Henning Jacobsen and Thea Birkeland Kloster in Economic Bulletin 4/2005
• What drives house prices? (pdf, 1096 kB)
  by Dag Henning Jacobsen and Bjørn E. Naug in Economic Bulletin 1/2005
• What influences the growth of household debt? (pdf, 441 kB)
  by Dag Henning Jacobsen and Bjørn E. Naug in Economic Bulletin 3/2004