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A new financial stability risk index to predict the near-term risk of recession

Author

Listed:
  • Deghi, Andrea
  • Welz, Peter
  • Żochowski, Dawid

Abstract

The real economy repercussions of financial crises are the ultimate focus of financial stability monitoring and policymakers. By extending a standard set of financial stability indicators with indicators capturing spillover and contagion risks, this special feature proposes a financial stability risk index (FSRI) that has predictive power for the near-term risk of deep recessions. It is shown that the empirical performance of the index benefits from combining a large set of macro-financial indicators and, notably, that the information content of the spillover and contagion risk indicators is important. JEL Classification: G00

Suggested Citation

  • Deghi, Andrea & Welz, Peter & Żochowski, Dawid, 2018. "A new financial stability risk index to predict the near-term risk of recession," Financial Stability Review, European Central Bank, vol. 1.
    • Handle: RePEc:ecb:fsrart:2018:0001:1
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    File URL: https://www.ecb.europa.eu//pub/financial-stability/fsr/special/html/ecb.fsrart201805_1.en.html
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    Citations

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    Cited by:

    1. Andrea Mazzocchetti & Eliana Lauretta & Marco Raberto & Andrea Teglio & Silvano Cincotti, 2020. "Systemic financial risk indicators and securitised assets: an agent-based framework," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 15(1), pages 9-47, January.
    2. Henri-Paul Rousseau, 2019. "A schematic view of government as regulator and insurer of the financial system," PSE Working Papers halshs-01993612, HAL.
    3. Henri-Paul Rousseau, 2019. "A schematic view of government as regulator and insurer of the financial system," Working Papers halshs-01993612, HAL.
    4. Maria Elvira Mancino & Simona Sanfelici, 2020. "Identifying financial instability conditions using high frequency data," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 15(1), pages 221-242, January.
    5. George N. Apostolakis & Nikolaos Giannellis & Athanasios P. Papadopoulos, 2023. "Macro‐financial effects of monetary policy easing," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 42(3), pages 715-738, April.
    6. Cabral, Inês & Detken, Carsten & Fell, John & Henry, Jérôme & Hiebert, Paul & Kapadia, Sujit & Pires, Fatima & Salleo, Carmelo & Constâncio, Vítor & Nicoletti Altimari, Sergio, 2019. "Macroprudential policy at the ECB: Institutional framework, strategy, analytical tools and policies," Occasional Paper Series 227, European Central Bank.

    More about this item

    Keywords

    financial stability risk index; risk of recession;

    JEL classification:

    • G00 - Financial Economics - - General - - - General

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