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Some Financial Stability Indicators for Brazil

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  • Adriana Soares Sales
  • Waldyr D. Areosa
  • Marta B. M. Areosa

Abstract

We present a methodology to construct a Broad Financial Stability Indicator (FSIB) based on unobserved common factors and a Specific Financial Stability Indicator (FSIS) for the Brazilian economy combining observed credit, debt and exchange rate markets indicators. Rather than advocate a particular numerical indicator of financial stability, our main goal is methodological. Our indicators, calculated in sample and ex-post, seem to capture three periods of considerably high financial instability in Brazil: (i) the 1998/1999 speculative attack on the Real, (ii) the government transition of 2002/2003 and (iii) the intensification of the 2008/2009 subprime financial crisis triggered by the collapse of the Lehman Brothers. We also propose an alternative methodology that decomposes business cycle fluctuations in two components -- a Financial Factor (FF) and a Real Factor (RF) -- which are identified from co-movements of financial and non-financial variables. The results are similar to the ones pointed out by our FSIB and FSIS measures.

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File URL: http://www.bcb.gov.br/pec/wps/ingl/wps287.pdf
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Bibliographic Info

Paper provided by Central Bank of Brazil, Research Department in its series Working Papers Series with number 287.

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Date of creation: Jul 2012
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Handle: RePEc:bcb:wpaper:287

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Web page: http://www.bcb.gov.br/?english

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  1. Jan Willem van den End, 2006. "Indicator and boundaries of financial stability," DNB Working Papers 097, Netherlands Central Bank, Research Department.
  2. Joon-Ho Hahm & Frederic S. Mishkin & Hyun Song Shin & Kwanho Shin, 2012. "Macroprudential Policies in Open Emerging Economies," NBER Working Papers 17780, National Bureau of Economic Research, Inc.
  3. Carlos Montoro & Ramon Moreno, 2011. "The use of reserve requirements as a policy instrument in Latin America," BIS Quarterly Review, Bank for International Settlements, March.
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Cited by:
  1. Luiz A. Pereira da Silva & Adriana Soares Sales & Wagner Piazza Gaglianone, 2012. "Financial Stability in Brazil," Working Papers Series 289, Central Bank of Brazil, Research Department.
  2. Papadimitriou, Theophilos & Gogas, Periklis & Tabak, Benjamin M., 2013. "Complex networks and banking systems supervision," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(19), pages 4429-4434.
  3. A. Hakan Kara & Pinar Ozlu & Deren Unalmis, 2012. "Financial Conditions Indices for the Turkish Economy," CBT Research Notes in Economics 1231, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  4. Bruno Martins, 2012. "Local Market Structure and Bank Competition: evidence from the Brazilian auto loan market," Working Papers Series 299, Central Bank of Brazil, Research Department.

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