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Macrofinancial vulnerabilities and future financial stress: assessing systemic risks and predicting systemic events

In: Macroprudential regulation and policy

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  • Marco Lo Duca

    (ECB)

  • Tuomas Peltonen

    (ECB)

Abstract

This paper develops a framework for assessing systemic risks and for predicting (out-of-sample) systemic events, i.e. periods of extreme financial instability with potential real costs. We test the ability of a wide range of JEL Classification: E44, E58, F01, F37, G01
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Suggested Citation

  • Marco Lo Duca & Tuomas Peltonen, 2011. "Macrofinancial vulnerabilities and future financial stress: assessing systemic risks and predicting systemic events," BIS Papers chapters, in: Bank for International Settlements (ed.), Macroprudential regulation and policy, volume 60, pages 82-88, Bank for International Settlements.
  • Handle: RePEc:bis:bisbpc:60-11
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    References listed on IDEAS

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    1. Lo Luca, Marco & Peltonen, Tuomas, 2011. "Macro-financial vulnerabilities and future financial stress : Assessing systemic risks and predicting systemic events," BOFIT Discussion Papers 2/2011, Bank of Finland, Institute for Economies in Transition.
    2. Michael D. Bordo & Michael J. Dueker & David C. Wheelock, 2002. "Aggregate Price Shocks and Financial Instability: A Historical Analysis," Economic Inquiry, Western Economic Association International, vol. 40(4), pages 521-538, October.
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    4. Detken, Carsten & Alessi, Lucia, 2009. "'Real time'early warning indicators for costly asset price boom/bust cycles: a role for global liquidity," Working Paper Series 1039, European Central Bank.
    5. Moritz Schularick & Alan M. Taylor, 2012. "Credit Booms Gone Bust: Monetary Policy, Leverage Cycles, and Financial Crises, 1870-2008," American Economic Review, American Economic Association, vol. 102(2), pages 1029-1061, April.
    6. Dieter Gerdesmeier & Hans‐Eggert Reimers & Barbara Roffia, 2010. "Asset Price Misalignments and the Role of Money and Credit," International Finance, Wiley Blackwell, vol. 13(3), pages 377-407, December.
    7. Miroslav Misina & Greg Tkacz, 2009. "Credit, Asset Prices, and Financial Stress," International Journal of Central Banking, International Journal of Central Banking, vol. 5(4), pages 95-122, December.
    8. Fabian Valencia & Luc Laeven, 2008. "Systemic Banking Crises; A New Database," IMF Working Papers 08/224, International Monetary Fund.
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    Citations

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    Cited by:

    1. van Roye, Björn, 2011. "Financial stress and economic activity in Germany and the Euro Area," Kiel Working Papers 1743, Kiel Institute for the World Economy (IfW).
    2. Ponomarenko, Alexey, 2013. "Early warning indicators of asset price boom/bust cycles in emerging markets," Emerging Markets Review, Elsevier, vol. 15(C), pages 92-106.
    3. Lepers, Etienne & Sánchez Serrano, Antonio, 2020. "Decomposing financial (in)stability in emerging economies," Research in International Business and Finance, Elsevier, vol. 51(C).
    4. Sarlin, Peter & Peltonen, Tuomas A., 2013. "Mapping the state of financial stability," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 26(C), pages 46-76.
    5. Leroi RAPUTSOANE, 2016. "Disaggregated Credit Extension and Financial Distress in South Africa," Journal of Economics Library, KSP Journals, vol. 3(2), pages 226-240, June.
    6. Rémy Charleroy & Michael A. Stemmer, 2014. "An Emerging Market Financial Conditions Index: A VAR Approach," Documents de travail du Centre d'Economie de la Sorbonne 14068, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    7. Nasreen, Samia & Anwar, Sofia & Ozturk, Ilhan, 2017. "Financial stability, energy consumption and environmental quality: Evidence from South Asian economies," Renewable and Sustainable Energy Reviews, Elsevier, vol. 67(C), pages 1105-1122.
    8. Vašíček, Bořek & Žigraiová, Diana & Hoeberichts, Marco & Vermeulen, Robert & Šmídková, Kateřina & de Haan, Jakob, 2017. "Leading indicators of financial stress: New evidence," Journal of Financial Stability, Elsevier, vol. 28(C), pages 240-257.
    9. Sun, Xiaolei & Yao, Xiaoyang & Wang, Jun, 2017. "Dynamic interaction between economic policy uncertainty and financial stress: A multi-scale correlation framework," Finance Research Letters, Elsevier, vol. 21(C), pages 214-221.
    10. Dovern, Jonas & van Roye, Björn, 2013. "International transmission of financial stress: Evidence from a GVAR," Kiel Working Papers 1844, Kiel Institute for the World Economy (IfW).
    11. Dr. Michael Sigmund & Dr. Ingrid Stein, 2017. "What predicts Financial (In)Stability? A Bayesian Approach," Credit and Capital Markets, Credit and Capital Markets, vol. 50(3), pages 299-336.
    12. Diana Zigraiova & Petr Jakubik, 2014. "Systemic Event Prediction by Early Warning System," Working Papers IES 2014/01, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Jan 2014.
    13. Filippopoulou, Chryssanthi & Galariotis, Emilios & Spyrou, Spyros, 2020. "An early warning system for predicting systemic banking crises in the Eurozone: A logit regression approach," Journal of Economic Behavior & Organization, Elsevier, vol. 172(C), pages 344-363.
    14. Dovern, Jonas & van Roye, Björn, 2014. "International transmission and business-cycle effects of financial stress," Journal of Financial Stability, Elsevier, vol. 13(C), pages 1-17.
    15. Jaimes Caruana, 2013. "Measuring Systemic Risk," Chapters, in: Andreas Dombret & Otto Lucius (ed.),Stability of the Financial System, chapter 9, Edward Elgar Publishing.
    16. 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.
    17. Simone Auer, 2017. "A Financial Conditions Index for the CEE economies," Temi di discussione (Economic working papers) 1145, Bank of Italy, Economic Research and International Relations Area.
    18. Cevik, Emrah Ismail & Dibooglu, Sel & Kutan, Ali M., 2013. "Measuring financial stress in transition economies," Journal of Financial Stability, Elsevier, vol. 9(4), pages 597-611.
    19. Jarmulska, Barbara, 2020. "Random forest versus logit models: which offers better early warning of fiscal stress?," Working Paper Series 2408, European Central Bank.
    20. Sarlin, Peter & Peltonen, Tuomas A., 2013. "Mapping the state of financial stability," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 26(C), pages 46-76.
    21. Phillip Monin, 2017. "The OFR Financial Stress Index," Working Papers 17-04, Office of Financial Research, US Department of the Treasury.
    22. Sun, Lixin & Huang, Yuqin, 2016. "Measuring the instability of China's financial system: Indices construction and an early warning system," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 10, pages 1-41.
    23. Solntsev, O. & Mamonov, M. & Pestova, A. & Magomedova, Z., 2011. "Experience in Developing Early Warning System for Financial Crises and the Forecast of Russian Banking Sector Dynamic in 2012," Journal of the New Economic Association, New Economic Association, issue 12, pages 41-76.
    24. Corina SAMAN, 2016. "The Impact of the US and Euro Area Financial Systemic Stress to the Romanian Economy," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 170-183, December.

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    More about this item

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F01 - International Economics - - General - - - Global Outlook
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • G01 - Financial Economics - - General - - - Financial Crises

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