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Financial Stress Indices and Financial Crises

Author

Listed:
  • Robert Vermeulen
  • Marco Hoeberichts
  • Bořek Vašíček
  • Diana Žigraiová
  • Kateřina Šmídková
  • Jakob Haan

Abstract

This paper develops a Financial Stress Index (FSI) for 28 OECD countries and examines its relationship to crises using a novel database for financial crises. A stress index measures the current state of stress in the financial system and summarizes it in a single statistic. Our results suggest that even though our FSI is clearly related to the occurrence of crises, there is only a weak relationship between the FSI and the onset of a crisis, notably the onset of a banking crisis. Policymakers should therefore be aware of the limited usefulness of FSIs as an early warning indicator. Copyright The Author(s) 2015

Suggested Citation

  • Robert Vermeulen & Marco Hoeberichts & Bořek Vašíček & Diana Žigraiová & Kateřina Šmídková & Jakob Haan, 2015. "Financial Stress Indices and Financial Crises," Open Economies Review, Springer, vol. 26(3), pages 383-406, July.
    • Handle: RePEc:kap:openec:v:26:y:2015:i:3:p:383-406
    DOI: 10.1007/s11079-015-9348-x
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    References listed on IDEAS

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    More about this item

    Keywords

    Financial stress index; Financial crises; Developed countries; Early warning indicators; E5; G10;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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