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A new method for measuring financial resilience

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  • Chen, Yilin
  • Sun, Chentong

Abstract

This paper proposes a new model to measure financial resilience from the perspective of external risk shocks, which composes of three submodels, namely, the dynamic factor model, the time-varying parameter vector autoregression (TVP-VAR) model, and the resilience characteristic measurement model with two dimensions: absorption intensity and absorption duration. At the theoretical level, we simulate and analyze the changing paths of financial resilience under different scenarios. At the empirical level, we apply the model to study the resilience of the UK financial market. The results indicate that the UK financial resilience fluctuations exhibit phased characteristics and there is a clear inverse relationship between absorption intensity and absorption duration. Notably, periods of low resilience often coincide with specific risk events.

Suggested Citation

  • Chen, Yilin & Sun, Chentong, 2024. "A new method for measuring financial resilience," Economics Letters, Elsevier, vol. 242(C).
    • Handle: RePEc:eee:ecolet:v:242:y:2024:i:c:s0165176524003677
    DOI: 10.1016/j.econlet.2024.111883
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    References listed on IDEAS

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    1. repec:bcp:journl:v:8:y:2024:i:10:p:3284-3294 is not listed on IDEAS
    2. Si-Yao Wei & Kun-Liang Jiang & Wei-Xing Zhou, 2024. "Uncertainty and financial market resilience: Evidence from China," Papers 2409.18422, arXiv.org, revised Nov 2025.
    3. Ouyang, Zisheng & Deng, Yaoxun & Lai, Yongzeng, 2026. "Measuring the resilience of higher-order financial risk networks: A new interpretable multidimensional method," Finance Research Letters, Elsevier, vol. 88(C).
    4. Chen, Yilin & Sun, Chentong & Zhang, Xu, 2025. "Analyzing and forecasting China's financial resilience: Measurement techniques and identification of key influencing factors," Journal of Financial Stability, Elsevier, vol. 76(C).
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    7. Cavallaro, Eleonora & Villani, Ilaria, 2024. "Financial resilience, growth and risk sharing in the EU," International Economics, Elsevier, vol. 180(C).

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    Keywords

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    JEL classification:

    • G00 - Financial Economics - - General - - - General
    • G01 - Financial Economics - - General - - - Financial Crises
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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