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Measuring financial stress in transition economies

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Author Info

  • Cevik, Emrah Ismail
  • Dibooglu, Sel
  • Kutan, Ali M.

Abstract

This 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 Info

Article provided by Elsevier in its journal Journal of Financial Stability.

Volume (Year): 9 (2013)
Issue (Month): 4 ()
Pages: 597-611

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Handle: RePEc:eee:finsta:v:9:y:2013:i:4:p:597-611

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Web page: http://www.elsevier.com/locate/jfstabil

Related research

Keywords: Financial crises; Financial pressure; Economic indicators; Business cycles; Transition economies;

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References

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Cited by:
  1. Maciej Krzak & Grzegorz Poniatowski & Katarzyna Wasik, 2014. "Measuring financial stress and economic sensitivity in CEE countries," CASE Network Reports 0117, CASE-Center for Social and Economic Research.
  2. Costas Milas, 2014. "Financial Stress and the Impact of Public Debt on UK Growth in High versus Low-Growth Regimes: 1850-2013," Working Paper Series 13_14, The Rimini Centre for Economic Analysis.

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