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Introduction to the Financial Macro-econometric Model

January 30, 2012
Atsushi Ishikawa*1
Koichiro Kamada*2
Yoshiyuki Kurachi*3
Kentaro Nasu*4
Yuki Teranishi*5

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Abstract

This paper introduces the Financial Macro-econometric Model (FMM) being developed by the Bank of Japan. The FMM is a medium-sized structural model comprising two sectors: a financial sector and a macroeconomic sector. It permits the quantitative analysis of various phenomena created by the feedback loop between the financial economy and the real economy. The model's most distinctive feature, which is rarely observed in this type of model, is seen in the financial sector, where we model the actual risk management behavior of banks. It facilitates macro stress testing and allows the robustness of the financial system and its effects on the macro economy to be consistently verified from various perspectives.

The authors would like to thank Kaoru Hosono (Gakushuin University), Kazuo Ueda (The University of Tokyo) and the staff of the Bank of Japan for their helpful comments. Any errors or omissions are the responsibility of the authors. The views expressed here are those of the authors and should not be ascribed to the Bank of Japan or its Financial System and Bank Examination Department.

  •   *1 Financial System and Bank Examination Department
    E-mail : atsushi.ishikawa@boj.or.jp
  •   *2 Financial System and Bank Examination Department
    E-mail : kouichirou.kamada@boj.or.jp
  •   *3 Financial System and Bank Examination Department
    E-mail : yoshiyuki.kurachi@boj.or.jp
  •   *4 Financial System and Bank Examination Department
    E-mail : kentarou.nasu@boj.or.jp
  •   *5 Financial System and Bank Examination Department
    E-mail : yuuki.teranishi@boj.or.jp

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