A Quantitative Assessment of Financial Conditions in Asia
AbstractWe propose a new Financial Condition Index (FCI) for Asian economies based on two different methodologies: a VAR model and a Dynamic Factor Model. The paper shows that this index has predictive power in forecasting GDP growth and may be thus used as a leading indicator. Based on the FCI, financial conditions in Asia tightened substantially earlier in the global crisis, reflecting losses in the stock markets and tighter credit conditions. In early 2010, financial conditions in Asia recovered rapidly and reached precrisis levels, thanks to accommodative monetary policies and a rapid rebound in regional equity markets.
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Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 11/170.
Date of creation: 01 Jul 2011
Date of revision:
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-08-22 (All new papers)
- NEP-CWA-2011-08-22 (Central & Western Asia)
- NEP-FDG-2011-08-22 (Financial Development & Growth)
- NEP-FOR-2011-08-22 (Forecasting)
- NEP-SEA-2011-08-22 (South East Asia)
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