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The Financial Activity Index

Author

Listed:
  • Atsushi Ishikawa

    (Bank of Japan)

  • Koichiro Kamada

    (Bank of Japan)

  • Kazutoshi Kan

    (Bank of Japan)

  • Ryota Kojima

    (Bank of Japan)

  • Yoshiyuki Kurachi

    (Bank of Japan)

  • Kentaro Nasu

    (Bank of Japan)

  • Yuki Teranishi

    (Bank of Japan)

Abstract

The financial activity index (FAIX) introduced in this paper is a selection of financial indicators that borrow from prior literature on early bubble warnings and are particularly adept at explaining the bubble occurred in Japan starting in the 1980s. Our index comprises 10 financial indicators and is envisioned for use from two main perspectives. First, it is used for a multi-faceted analysis of overheating and overcooling of financial activity through individual indicators in each segment. Second, it is used to monitor from a macroeconomic perspective the dynamics of bubble creation and destruction through an aggregation of the indicators. The index, with these characteristics, should be an effective tool for detecting the accumulation of financial imbalances.

Suggested Citation

  • Atsushi Ishikawa & Koichiro Kamada & Kazutoshi Kan & Ryota Kojima & Yoshiyuki Kurachi & Kentaro Nasu & Yuki Teranishi, 2012. "The Financial Activity Index," Bank of Japan Working Paper Series 12-E-4, Bank of Japan.
    • Handle: RePEc:boj:bojwps:12-e-4
    as

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    File URL: http://www.boj.or.jp/en/research/wps_rev/wps_2012/data/wp12e04.pdf
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    References listed on IDEAS

    as
    1. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "Is the 2007 US Sub-Prime Financial Crisis So Different?: An International Historical Comparison," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 56(3), pages 291-299.
    2. Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, vol. 89(3), pages 473-500, June.
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    Cited by:

    1. Arlyana Abubakar & Rieska Indah Astuti & Rini Oktapiani, 2018. "Selection of Early Warning Indicator to Identify Distress in the Corporate Sector: Crisis Prevention Strengthening Efforts," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 20(3), pages 343-374, January.
    2. Yuichiro Ito & Tomiyuki Kitamura & Koji Nakamura & Takashi Nakazawa, 2014. "New Financial Activity Indexes: Early Warning System for Financial Imbalances in Japan," Bank of Japan Working Paper Series 14-E-7, Bank of Japan.
    3. 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.

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