Measuring financial stress in transition economies
AbstractThis study constructs a financial stress index for Bulgaria, the Czech Republic, Hungary, Poland, and Russia and examines the relationship between financial stress and economic activity. The financial stress index incorporates banking sector fragility, time varying stock market return volatility, sovereign debt spreads, an exchange market pressure index, and trade credit. These variables seem to capture key aspects of financial stress in sample countries as the index peaks at known financial crises in these countries. We then examine the relationship between financial stress and economic activity. Impulse response functions based on bivariate VARs show a significant relationship between financial stress and some measures of economic activity. Overall, the constructed financial stress index provides valuable information on the state of the economy and economic activity.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Financial Stability.
Volume (Year): 9 (2013)
Issue (Month): 4 ()
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Web page: http://www.elsevier.com/locate/jfstabil
Financial crises; Financial pressure; Economic indicators; Business cycles; Transition economies;
Find related papers by JEL classification:
- G01 - Financial Economics - - General - - - Financial Crises
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
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