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Financial Stability and Creating Financial Stability Index for Turkey

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  • Ahmet Zelka

Abstract

This study aims to create an index, which will be used for monitoring financial stability for Turkey. For this purpose, firstly the concept of financial stability was defined. As a result of the literature review, the variables considered to give information about financial stability were examined and the variables were grouped by principal component analysis. Finally, generated factors were subjected to logistic regression. The variables which were examined in the study include a total of 57 quarters, which is between the second quarter of 2003 and the second quarter of 2017. Three different dependent variables were used in the logistic regression analysis, each of which was formed by taking into consideration the “break points” in the independent variable series. All variables included in the financial stability index were standardized. The financial stability index was formed with the results obtained by the logistic regression analysis, and then; the contribution of the variables to financial stability was interpreted. It will be possible that the stakeholders in the financial system have information about the expected change in the level of financial stability by monitoring the variables which were examined and used in the analysis.

Suggested Citation

  • Ahmet Zelka, 2022. "Financial Stability and Creating Financial Stability Index for Turkey," Alphanumeric Journal, Bahadir Fatih Yildirim, vol. 10(1), pages 51-68, June.
    • Handle: RePEc:anm:alpnmr:v:10:y:2022:i:1:p:51-68
    DOI: https://doi.org/10.17093/alphanumeric.934795
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    References listed on IDEAS

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    1. Oosterloo, Sander & de Haan, Jakob & Jong-A-Pin, Richard, 2007. "Financial stability reviews: A first empirical analysis," Journal of Financial Stability, Elsevier, vol. 2(4), pages 337-355, March.
    2. Illing, Mark & Liu, Ying, 2006. "Measuring financial stress in a developed country: An application to Canada," Journal of Financial Stability, Elsevier, vol. 2(3), pages 243-265, October.
    3. Gerlach, Richard & Wilson, Patrick & Zurbruegg, Ralf, 2006. "Structural breaks and diversification: The impact of the 1997 Asian financial crisis on the integration of Asia-Pacific real estate markets," Journal of International Money and Finance, Elsevier, vol. 25(6), pages 974-991, October.
    4. Miguel Morales & Dairo Estrada, 2010. "A financial stability index for Colombia," Annals of Finance, Springer, vol. 6(4), pages 555-581, October.
    5. Mr. Garry J. Schinasi, 2004. "Defining Financial Stability," IMF Working Papers 2004/187, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Financial Crisis; Financial Stability; Financial Stability Index; Financial System; Logistic Regression Analysis;
    All these keywords.

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics

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