Some Financial Stability Indicators for Brazil
We present a methodology to construct a Broad Financial Stability Indicator (FSIB) based on unobserved common factors and a Specific Financial Stability Indicator (FSIS) for the Brazilian economy combining observed credit, debt and exchange rate markets indicators. Rather than advocate a particular numerical indicator of financial stability, our main goal is methodological. Our indicators, calculated in sample and ex-post, seem to capture three periods of considerably high financial instability in Brazil: (i) the 1998/1999 speculative attack on the Real, (ii) the government transition of 2002/2003 and (iii) the intensification of the 2008/2009 subprime financial crisis triggered by the collapse of the Lehman Brothers. We also propose an alternative methodology that decomposes business cycle fluctuations in two components -- a Financial Factor (FF) and a Real Factor (RF) -- which are identified from co-movements of financial and non-financial variables. The results are similar to the ones pointed out by our FSIB and FSIS measures.
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- Jan Willem van den End, 2006. "Indicator and boundaries of financial stability," DNB Working Papers 097, Netherlands Central Bank, Research Department.
- Carlos Montoro & Ramon Moreno, 2011. "The use of reserve requirements as a policy instrument in Latin America," BIS Quarterly Review, Bank for International Settlements, March.
- Hahm, Joon-Ho & Mishkin, Frederic S. & Shin, Hyun Song & Shin, Kwanho, 2011.
"Macroprudential policies in open emerging economies,"
Federal Reserve Bank of San Francisco, issue Nov, pages 63-114.
- Joon-Ho Hahm & Frederic S. Mishkin & Hyun Song Shin & Kwanho Shin, 2012. "Macroprudential Policies in Open Emerging Economies," NBER Working Papers 17780, National Bureau of Economic Research, Inc.
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