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Determinants of US Financial fragility conditions

  • Fabio C. Bagliano
  • Claudio Morana

The recent financial crisis has highlighted the fragility of the US financial system under several respects. In this paper, the properties of a summary index of financial fragility, timely capturing changes in credit and liquidity risk, distress in the mortgage market, and corporate default risk, is investigated over the 1986-2010 period. We find that observed fluctuations in the financial fragility index can be attributed to identified (global and domestic) macroeconomic (20%) and financial disturbances (40% to 50%), over both short- and long-term horizons, as well as to oil-supply shocks in the long-term (25%). Over-all, differently from financial shocks, macroeconomic disturbances have generally had a stabilizing effect.

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File URL: http://dipeco.economia.unimib.it/repec/pdf/mibwpaper224.pdf
File Function: First version, 2013
Download Restriction: no

Paper provided by University of Milano-Bicocca, Department of Economics in its series Working Papers with number 224.

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Length: 42
Date of creation: Feb 2013
Date of revision: Feb 2013
Handle: RePEc:mib:wpaper:224
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  1. Claudio Morana, 2013. "The oil price-macroeconomy relationship since the mid-1980s: A global perspective," Working Papers 223, University of Milano-Bicocca, Department of Economics, revised Feb 2013.
  2. Fabio C. Bagliano & Claudio Morana, 2010. "The Great Recession: US dynamics and spillovers to the world economy," Working papers 17, Former Department of Economics and Public Finance "G. Prato", University of Torino.
  3. Luboš Pástor & Robert F. Stambaugh, . "Liquidity Risk and Expected Stock Returns," CRSP working papers 531, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  4. Working, Holbrook, 1960. "Speculation on Hedging Markets," Food Research Institute Studies, Stanford University, Food Research Institute, issue 02, May.
  5. Carhart, Mark M, 1997. " On Persistence in Mutual Fund Performance," Journal of Finance, American Finance Association, vol. 52(1), pages 57-82, March.
  6. Granger, Clive W. J. & Jeon, Yongil, 2004. "Thick modeling," Economic Modelling, Elsevier, vol. 21(2), pages 323-343, March.
  7. Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February.
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