Indicator and boundaries of financial stability

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Indicator and boundaries of financial stability

Author Info

Jan Willem van den End

Abstract

This paper presents an information variable for financial stability consisting of a composite index and its related critical boundaries. It is an extension of a Financial Conditions Index with information on financial institutions. The indicator is bounded, on one side, by the instability boundary which depends on the solvency buffers of the institutions and the stress level on financial markets. On the other side, the imbalances boundary signals when extreme imbalances accumulate. This concept is applied to the Netherlands and six OECD countries which experienced a financial crisis.

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Paper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number 097.

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Date of creation: Apr 2006
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Handle: RePEc:dnb:dnbwpp:097

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Find related papers by JEL classification:
E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
G20 - Financial Economics - - Financial Institutions and Services - - - General

This paper has been announced in the following NEP Reports:

NEP-ALL-2006-04-22 (All new papers)
NEP-CBA-2006-04-22 (Central Banking)
NEP-FIN-2006-04-22 (Finance)
NEP-FMK-2006-04-22 (Financial Markets)
NEP-MAC-2006-04-22 (Macroeconomics)

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Céline Gauthier & Christopher Graham & Ying Liu, 2004. "Financial Conditions Indexes for Canada," Working Papers 04-22, Bank of Canada. [Downloadable!]
Jan Willem van den End & Mostafa Tabbae, 2005. "Measuring Financial Stability: Applying the MfRisk Model to the Netherlands," DNB Working Papers 030, Netherlands Central Bank, Research Department. [Downloadable!]
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- Alberto Montagnoli & Oreste Napolitano, 2006. "Financial Condition Index and interest rate settings: a comparative analysis," Discussion Papers 2_2006, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy. [Downloadable!]
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- Giuseppe Vulpes & Reint Gropp & Jukka M. Vesala, 2002. "Equity and bond market signals as leading indicators of bank fragility," Working Paper Series 150, European Central Bank. [Downloadable!]
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repec:fth:bfdipa:17/2001 is not listed on IDEAS
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Other versions:
- Ben Bernanke & Mark Gertler, 2000. "Monetary Policy and Asset Price Volatility," NBER Working Papers 7559, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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Other versions:
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