Advanced Search
MyIDEAS: Login

A new index of financial conditions

Contents:

Author Info

  • Gary Koop
  • Dimitris Korobilis

Abstract

We use factor augmented vector autoregressive models with time-varying coe¢ cients to construct a nancial conditions index. The time-variation in the parameters allows for the weights attached to each nancial variable in the index to evolve over time. Furthermore, we develop methods for dynamic model averaging or selection which allow the nancial variables entering into the FCI to change over time. We discuss why such extensions of the existing literature are important and show them to be so in an empirical application involving a wide range of nancial variables.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.gla.ac.uk/media/media_271007_en.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Business School - Economics, University of Glasgow in its series Working Papers with number 2013_06.

as in new window
Length:
Date of creation:
Date of revision:
Handle: RePEc:gla:glaewp:2013_06

Contact details of provider:
Postal: Adam Smith Building, Glasgow G12 8RT
Phone: 0141 330 4618
Fax: 0141 330 4940
Web page: http://www.gla.ac.uk/schools/business/research/
More information through EDIRC

Related research

Keywords: financial stress; dynamic model averaging; forecasting;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Fabio C. Bagliano & Claudio Morana, 2010. "The Great Recession: US dynamics and spillovers to the world economy," ICER Working Papers - Applied Mathematics Series 34-2010, ICER - International Centre for Economic Research.
  2. Troy Matheson, 2011. "Financial Conditions Indexes for the United States and Euro Area," IMF Working Papers 11/93, International Monetary Fund.
  3. Koop, Gary & Korobilis, Dimitris, 2012. "Large time-varying parameter VARs," MPRA Paper 38591, University Library of Munich, Germany.
  4. Gary Koop & Dimitris Korobilis, 2011. "Forecasting Inflation Using Dynamic Model Averaging," Working Papers 1119, University of Strathclyde Business School, Department of Economics.
  5. Castelnuovo, Efrem, 2013. "Monetary policy shocks and financial conditions: A Monte Carlo experiment," Journal of International Money and Finance, Elsevier, vol. 32(C), pages 282-303.
  6. Eickmeier, Sandra & Lemke, Wolfgang & Marcellino, Massimiliano, 2011. "The changing international transmission of financial shocks: evidence from a classical time-varying FAVAR," Discussion Paper Series 1: Economic Studies 2011,05, Deutsche Bundesbank, Research Centre.
  7. Giorgio E. Primiceri, 2005. "Time Varying Structural Vector Autoregressions and Monetary Policy," Review of Economic Studies, Oxford University Press, vol. 72(3), pages 821-852.
  8. Catherine Doz & Domenico Giannone & Lucrezia Reichlin, 2006. "A Two-step estimator for large approximate dynamic factor models based on Kalman filtering," THEMA Working Papers 2006-23, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  9. Ben S. Bernanke & Jean Boivin & Piotr Eliasz, 2004. "Measuring the Effects of Monetary Policy: A Factor-Augmented Vector Autoregressive (FAVAR) Approach," NBER Working Papers 10220, National Bureau of Economic Research, Inc.
  10. Felices, Guillermo & Wieladek, Tomasz, 2012. "Are emerging market indicators of vulnerability to financial crises decoupling from global factors?," Journal of Banking & Finance, Elsevier, vol. 36(2), pages 321-331.
  11. Dimitris Korobilis, 2013. "Assessing the Transmission of Monetary Policy Using Time-varying Parameter Dynamic Factor Models-super-," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 75(2), pages 157-179, 04.
  12. Kaufmann, Sylvia & Schumacher, Christian, 2012. "Finding relevant variables in sparse Bayesian factor models: Economic applications and simulation results," Discussion Papers 29/2012, Deutsche Bundesbank, Research Centre.
  13. Meligkotsidou, Loukia & Vrontos, Ioannis D., 2008. "Detecting structural breaks and identifying risk factors in hedge fund returns: A Bayesian approach," Journal of Banking & Finance, Elsevier, vol. 32(11), pages 2471-2481, November.
  14. Stephan Danninger & Irina Tytell & Ravi Balakrishnan & Selim Elekdag, 2009. "The Transmission of Financial Stress From Advanced to Emerging Economies," IMF Working Papers 09/133, International Monetary Fund.
  15. Jean Boivin & Serena Ng, 2003. "Are More Data Always Better for Factor Analysis?," NBER Working Papers 9829, National Bureau of Economic Research, Inc.
  16. Carriero, Andrea & Kapetanios, George & Marcellino, Massimiliano, 2012. "Forecasting government bond yields with large Bayesian vector autoregressions," Journal of Banking & Finance, Elsevier, vol. 36(7), pages 2026-2047.
  17. Marco Del Negro & Christopher Otrok, 2008. "Dynamic factor models with time-varying parameters: measuring changes in international business cycles," Staff Reports 326, Federal Reserve Bank of New York.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Mehmet Balcilar & Kirsten Thompson & Rangan Gupta & Renee van Eyden, 2014. "Testing the Asymmetric Effects of Financial Conditions in South Africa: A Nonlinear Vector Autoregression Approach," Working Papers 201414, University of Pretoria, Department of Economics.
  2. Kirsten Thompson & Renee van Eyden & Rangan Gupta, 2013. "Identifying a financial conditions index for South Africa," Working Papers 201333, University of Pretoria, Department of Economics.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:gla:glaewp:2013_06. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jeanette Findlay).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.