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A financial systemic stress index for Greece

Author

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  • Dimitrios P. Louzis

    () (Bank of Greece)

  • Angelos T. Vouldis

    () (Bank of Greece)

Abstract

The paper develops a financial systemic stress index (FSSI) for Greece. We present a methodology for constructing and evaluating a systemic stress index which: i) adopts the suggestion of Hollo et al. (2012) [Hollo, Kremer, and Duca (2012) “CISS – A ‘Composite Indicator of Systemic Stress’ in the Financial System” ECB Working Paper 1426] to incorporate time-varying correlations between different market segments, and uses a multivariate GARCH approach which is able to capture abrupt changes in correlations; ii) utilizes both market and balance sheet data; and iii) evaluates the FSSI utilizing the results of a survey, conducted among financial experts, in order to construct a benchmark chronology of financial crises for Greece, which in turn is used to investigate whether changes in the FSSI are good indicators for financial crises. The results show that the FSSI is able to provide a precise periodization of crises.

Suggested Citation

  • Dimitrios P. Louzis & Angelos T. Vouldis, 2013. "A financial systemic stress index for Greece," Working Papers 155, Bank of Greece.
  • Handle: RePEc:bog:wpaper:155
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    References listed on IDEAS

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    Cited by:

    1. Shaen Corbet & Cian Twomey, 2014. "An index of financial market stress for the United Kingdom," Economics and Business Letters, Oviedo University Press, vol. 3(2), pages 127-133.
    2. 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.
    3. Duprey, Thibaut & Klaus, Benjamin & Peltonen, Tuomas, 2017. "Dating systemic financial stress episodes in the EU countries," Journal of Financial Stability, Elsevier, vol. 32(C), pages 30-56.
    4. Kremer, Manfred & Lo Duca, Marco & Holló, Dániel, 2012. "CISS - a composite indicator of systemic stress in the financial system," Working Paper Series 1426, European Central Bank.
    5. Vdovychenko, Artem & Oros, Galyna, 2014. "Financial stress index: estimation and application in empirical researches in Ukraine," MPRA Paper 69337, University Library of Munich, Germany.
    6. Eleonora Iachini & Stefano Nobili, 2014. "An indicator of systemic liquidity risk in the Italian financial markets," Questioni di Economia e Finanza (Occasional Papers) 217, Bank of Italy, Economic Research and International Relations Area.
    7. Dimitris P. Louzis, 2014. "Macroeconomic and credit forecasts in a small economy during crisis: A large Bayesian VAR approach," Working Papers 184, Bank of Greece.
    8. Jan Babecky & Tomas Havranek & Jakub Mateju & Marek Rusnak & Katerina Smidkova & Borek Vasicek, 2011. "Early Warning Indicators of Economic Crises: Evidence from a Panel of 40 Developed Countries," Working Papers 2011/08, Czech National Bank, Research Department.
    9. Chau, Frankie & Deesomsak, Rataporn, 2014. "Does linkage fuel the fire? The transmission of financial stress across the markets," International Review of Financial Analysis, Elsevier, vol. 36(C), pages 57-70.
    10. Shaen Corbet, 2014. "The European Financial Market Stress Index," International Journal of Economics and Financial Issues, Econjournals, vol. 4(1), pages 217-230.
    11. Nadežda Sinenko & Deniss Titarenko & Mikus Arinš, 2013. "The Latvian financial stress index as an important element of the financial system stability monitoring framework," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 13(2), pages 85-110, December.
    12. Huotari, Jarkko, 2015. "Measuring financial stress – A country specific stress index for Finland," Research Discussion Papers 7/2015, Bank of Finland.
    13. Kliesen, Kevin L. & Owyang, Michael T. & Vermann, E. Katarina, 2012. "Disentangling diverse measures: a survey of financial stress indexes," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 369-398.

    More about this item

    Keywords

    Financial crisis; systemic stress; stress index; multivariate GARCH.;

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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