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Dating systemic financial stress episodes in the EU countries

Author

Listed:
  • Peltonen, Tuomas A.
  • Klaus, Benjamin
  • Duprey, Thibaut

Abstract

This paper introduces a new methodology to date systemic financial stress events in a transparent, objective and reproducible way. The financial cycle is captured by a monthly country-specific financial stress index. Based on a Markov Switching model, high financial stress regimes are identified and a simple algorithm is used to select those episodes of financial stress that are associated with a substantial negative impact on the real economy. By applying this framework to 27 EU countries, the paper is a first attempt to provide a chronology of systemic financial stress episodes in addition to the expert-detected events available so far. JEL Classification: C54, G01, G15

Suggested Citation

  • Peltonen, Tuomas A. & Klaus, Benjamin & Duprey, Thibaut, 2015. "Dating systemic financial stress episodes in the EU countries," Working Paper Series 1873, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20151873
    Note: 355041
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    JEL classification:

    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling
    • G01 - Financial Economics - - General - - - Financial Crises
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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