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Measuring Financial (In)Stability in Emerging Europe: A New Index-Based Approach

Author

Listed:
  • Petr Jakubík

    (C?eská národní banka (CNB), Institute of Economic Studies of Charles University in Prague)

  • Tomáš Slacík

    (Oesterreichische Nationalbank, Foreign Research Division)

Abstract

The importance of assessing financial stability in emerging Europe has increased rapidly since the recent financial crisis. Against this background, in the present paper we contribute to the existing literature in a twofold way: First, by using a broad range of indicators from money, bond, equity and foreign exchange markets, we develop a comprehensive financial instability index (FII) that gauges the level of financial market stress in some key Central, Eastern and Southeastern European (CESEE) countries. In a second step, we perform a panel estimation to investigate which macroprudential indicators that cover both internal and external imbalances explain the evolution of our FII over the past more than 15 years. Our analysis suggests that both the levels and changes of some indicators (such as credit growth and the level of private sector indebtedness) play an important role for financial stability. Moreover, we find that the impact of some key indicators on financial (in)stability is nonlinear and varies over time depending on market sentiment.

Suggested Citation

  • Petr Jakubík & Tomáš Slacík, 2013. "Measuring Financial (In)Stability in Emerging Europe: A New Index-Based Approach," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 25, pages 102-117.
    • Handle: RePEc:onb:oenbfs:y:2013:i:25:b:5
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    References listed on IDEAS

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    Cited by:

    1. Filip, Bogdan Florin, 2014. "Financial-Monetary Instability Factors within the Framework of the Recent Crisis in Romania," Working Papers of National Institute for Economic Research 141213, Institutul National de Cercetari Economice (INCE).
    2. Zigraiova, Diana & Jakubik, Petr, 2015. "Systemic event prediction by an aggregate early warning system: An application to the Czech Republic," Economic Systems, Elsevier, vol. 39(4), pages 553-576.
    3. Judith Eidenberger & Benjamin Neudorfer & Michael Sigmund & Ingrid Stein, 2013. "Quantifying Financial Stability in Austria, New Tools for Macroprudential Supervision," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 26, pages 62-81.
    4. Murat AKÇA & Vedat KAYA, 2023. "Effectiveness of Unconventional Monetary Policy Tools on Financial Stability: A NARDL Approach for Turkey," Bingol University Journal of Economics and Administrative Sciences, Bingol University, Faculty of Economics and Administrative Sciences, vol. 7(1), pages 63-80, June.
    5. Eidenberger, Judith & Neudorfer, Benjamin & Sigmund, Michael & Stein, Ingrid, 2014. "What predicts financial (in)stability? A Bayesian approach," Discussion Papers 36/2014, Deutsche Bundesbank.

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    More about this item

    Keywords

    Financial stability; crisis; macroprudential framework; emerging Europe; external and internal imbalances;
    All these keywords.

    JEL classification:

    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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