To assess the resilience of the system to adverse macroeconomic scenarios, stress testing analysis is carried out within a macro stress testing framework. Two major groups of macro testing exercises are conducted: one based on a multivariate regression, and the other based on a vector autoregressive (VAR) model.
If this happened, the debt burden of firms and the fiscal deficit would likely increase rather than decrease in real terms. The increase in long-term interest rates would also have an adverse impact on economic activity such as business fixed investment. Therefore, a policy to create inflation would most likely turn out to be counterproductive to the objective it was initially intended to achieve.