IDEAS home Printed from https://ideas.repec.org/a/eee/ecolet/v191y2020ics016517652030104x.html
   My bibliography  Save this article

Vulnerable growth in the euro area: Measuring the financial conditions

Author

Listed:
  • Figueres, Juan Manuel
  • Jarociński, Marek

Abstract

This paper examines which measures of financial conditions are informative about the tail risks to output growth in the euro area. The Composite Indicator of Systemic Stress (CISS) is more informative than indicators focusing on narrower segments of financial markets or their simple aggregation in the principal component. Conditionally on the CISS one can reproduce for the euro area the stylized facts known from the US, such as the strong negative correlation between conditional mean and conditional variance that generates stable upper quantiles and volatile lower quantiles of output growth.

Suggested Citation

  • Figueres, Juan Manuel & Jarociński, Marek, 2020. "Vulnerable growth in the euro area: Measuring the financial conditions," Economics Letters, Elsevier, vol. 191(C).
  • Handle: RePEc:eee:ecolet:v:191:y:2020:i:c:s016517652030104x
    DOI: 10.1016/j.econlet.2020.109126
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S016517652030104X
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Giacomini, Raffaella & Komunjer, Ivana, 2005. "Evaluation and Combination of Conditional Quantile Forecasts," Journal of Business & Economic Statistics, American Statistical Association, vol. 23, pages 416-431, October.
    2. Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, vol. 46(1), pages 33-50, January.
    3. Matheson, Troy D., 2012. "Financial conditions indexes for the United States and euro area," Economics Letters, Elsevier, vol. 115(3), pages 441-446.
    4. Lucrezia Reichlin & Giovanni Ricco & Thomas Hasenzagl, 2020. "Financial Variables as Predictors of Real Growth Vulnerability," Documents de Travail de l'OFCE 2020-06, Observatoire Francais des Conjonctures Economiques (OFCE).
    5. Adrian, Tobias & Duarte, Fernando & Liang, Nellie & Zabczyk, Pawel, 2020. "Monetary and Macroprudential Policy with Endogenous Risk," CEPR Discussion Papers 14435, C.E.P.R. Discussion Papers.
    6. Simon Gilchrist & Benoit Mojon, 2018. "Credit Risk in the Euro Area," Economic Journal, Royal Economic Society, vol. 128(608), pages 118-158, February.
    7. Kremer, Manfred & Lo Duca, Marco & Holló, Dániel, 2012. "CISS - a composite indicator of systemic stress in the financial system," Working Paper Series 1426, European Central Bank.
    8. repec:ecb:ecbwps:20111426 is not listed on IDEAS
    9. Simon Gilchrist & Benoit Mojon, 2018. "Credit Risk in the Euro Area," Economic Journal, Royal Economic Society, vol. 128(608), pages 118-158, February.
    10. Adelchi Azzalini & Antonella Capitanio, 2003. "Distributions generated by perturbation of symmetry with emphasis on a multivariate skew t‐distribution," Journal of the Royal Statistical Society Series B, Royal Statistical Society, vol. 65(2), pages 367-389, May.
    11. Chavleishvili, Sulkhan & Manganelli, Simone, 2019. "Forecasting and stress testing with quantile vector autoregression," Working Paper Series 2330, European Central Bank.
    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


    Cited by:

    1. De Santis, Roberto A. & Van der Veken, Wouter, 2020. "Macroeconomic risks across the globe due to the Spanish Flu," Working Paper Series 2466, European Central Bank.
    2. Milan Szabo, 2020. "Growth-at-Risk: Bayesian Approach," Working Papers 2020/3, Czech National Bank.
    3. De Santis, Roberto A. & Van der Veken, Wouter, 2020. "Forecasting macroeconomic risk in real time: Great and Covid-19 Recessions," Working Paper Series 2436, European Central Bank.
    4. Angelini, Elena & Darracq Pariès, Matthieu & Zimic, Srečko & Damjanović, Milan, 2020. "ECB-BASIR: a primer on the macroeconomic implications of the Covid-19 pandemic," Working Paper Series 2431, European Central Bank.

    More about this item

    Keywords

    Downside risk; Macro-financial linkages; Quantile regression;

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecolet:v:191:y:2020:i:c:s016517652030104x. 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: (Haili He). General contact details of provider: http://www.elsevier.com/locate/ecolet .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.