Although the importance of the trend component has fallen markedly since the 1970s, the estimates produced by Stock and Watson suggest that it is still large enough to be economically meaningful. The bottom panel of figure 2 illustrates this point; as you can see, the estimated trend (the solid line) has drifted up a bit since the mid-1990s.
The stress test exercises are important inputs for the ECB’s Supervisory Review and Evaluation Process (SREP)[4] and provide valuable insights for broader financial stability analyses based on granular information. [5] Over the last five years, cooperation between micro- and macroprudential authorities has increased in all phases of the stress-testing process.