Financial economics and macro-finance
Financial economics and macro-finance study how asset prices, credit and financial institutions interact with the real economy. They explain how shocks are amplified or absorbed through balance sheets and markets. Financial Stability stewards this page for the Nexus Consortium.
- Institution
- The Global Centre for Risk and Innovation (GCRI)
- Service level
- R0: information and enquiries
Econometric model
GCRI · Financial economics and… · Run R-3781
Estimates
robust standard errors
| Country programmes active | −0.08 | 0.18 | [−0.3, 0.2] | No |
| Evidence records with labels | 0.62 | 0.18 | [−0.3, 0.3] | No |
| Methods applied | 0.42 | 0.14 | [0.1, 0.5] | Yes |
| Reports released | −0.25 | 0.12 | [−0.5, 0.4] | No |
Method card
- Method
- Financial economics and…
- Sample
- 5486 obs
- Design
- panel, fixed effects
- Label
- MODELLED
Residuals by group
GCRI · Econometric modelEconometric model, in outline: domain structure with placeholder names and illustrative values, not a record.
The short answer.
Financial economics and macro-finance study how asset prices, credit and financial institutions interact with the real economy. Financial economics traces how physical, health or cyber shocks transmit to credit, sovereign debt and markets. In the Nexus Consortium, Financial Stability stewards its canonical page, and 10 other platforms apply it, including Capital Nexus and Banking Nexus.
Financial centres and urban exposure in Colombia.
The cities where people, assets and financial activity concentrate, shown for Colombia as an example geography for this subject.
What financial economics and macro-finance covers.
- 01
Core methods
asset pricing models; credit risk modelling; macro-financial modelling; systemic risk measurement; event studies; balance sheet analysis.
- 02
Data and instruments
market price and yield data; supervisory returns; corporate financial statements; flow of funds accounts; credit registries.
- 03
Validation
Models are back-tested against historical market episodes and crises. Results are compared with supervisory data and alternative specifications.
- 04
Limits
Relationships estimated in calm periods may break down in stress. Hidden leverage and interconnections are often unobserved.
- 05
Use in risk decisions
Financial economics traces how physical, health or cyber shocks transmit to credit, sovereign debt and markets. It informs macroprudential policy and the pricing of risk.
Financial economics informs supervisory and disclosure practice.
| Reference | What it sets |
|---|---|
| Basel Committee standards | Bank capital and liquidity |
| NGFS scenarios | Climate scenarios for financial analysis |
| IFRS S2 | Climate-related financial disclosure |
| Financial Stability Board | System-wide vulnerabilities |
Where science meets the balance sheet.
Financial economics explains how physical and transition shocks become credit losses, repricing and liquidity stress. GCRI's interest is the interface: hazard and exposure analysis in a form that financial models can use, with uncertainty that survives the translation. The sector analysis itself is GRA's mandate.
- Translate hazard probabilities into loss distributions, not single scenarios only.
- Avoid treating scenario outputs as forecasts.
- Nothing in this analysis is investment advice.
Platforms that apply this method.
- Capital NexusInstitutionGRF
- Banking NexusInstitutionGRA
- Asset Management NexusInstitutionGRA
- Capital Markets NexusInstitutionGRA
- Private Equity NexusInstitutionGRA
- Institutional Funds NexusInstitutionGRA
- Financial Regulation NexusInstitutionGRA
- Sovereign Capital NexusInstitutionGRA
- Financial StabilityInstitutionGRA
- Climate and Nature Financial RiskInstitutionGRA
- Private CreditInstitutionGRA
Who maintains this page.
Financial Stability stewards financial economics and macro-finance: it keeps this description current and reviews how the method is applied across the platforms.
Terms used on this page.
Each term as this page uses it. Where a standard-setting body defines the term, the wording follows that body.
| Term | Definition |
|---|---|
| Countercyclical capital buffer | A capital requirement raised when credit grows excessively and released in stress. |
| Second-round effects | Feedback from bank losses to the economy, such as tighter credit deepening a downturn. |
| Satellite model | A model linking scenario variables to a specific bank risk parameter, such as default rates. |
| Non-bank financial intermediation | Credit and investment activity outside the banking system, by funds, insurers and others. |
Where this page's references lead.
The bodies and documents this page is read against. Status and editions change; each link goes to the issuing body.
Where this page leads across the Consortium.
- Financial economics for public capitalGRFApplied in Capital Nexus.
- Financial economics for banking riskGRAApplied in Banking Nexus.
- Financial economics for asset managementGRAApplied in Asset Management Nexus.
- Financial economics for capital marketsGRAApplied in Capital Markets Nexus.
- Financial economics for private marketsGRAApplied in Private Equity Nexus.
- Financial economics for institutional fundsGRAApplied in Institutional Funds Nexus.
- Financial economics of regulationGRAApplied in Financial Regulation Nexus.
- Financial economics for sovereign balance sheetsGRAApplied in Sovereign Capital Nexus.
- Financial economics and macro-finance at Financial StabilityGRAApplied in Financial Stability.
- Financial economics and macro-finance at Climate and Nature Financial RiskGRAApplied in Climate and Nature Financial Risk.
- Financial economics and macro-finance for private creditGRAApplied in Private Credit.
Questions and answers.
Why does one institution host every method page?
How do I suggest a correction to a method page?
Around GCRI.
Start with an enquiry.
The current service level is R0: information and enquiries. An enquiry receives a reference and names the next step; applications, payments, compute allocations and registrations open only when their team, terms and review capacity exist.