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The Index of the Financial Safety (IFS) of South Africa and Bayesian Estimates for IFS Vector-Autoregressive Model

  • Matkovskyy, Roman

This paper proposes an approach to explore the strength of the financial system of a country against the possibility of financial perturbations appearing based on the construction of the Index of Financial Safety (IFS) of a country. The Markov Chain Monte Carlo (MCMC) and Gibbs sampler technique is used to estimate a Bayesian Vector Autoregressive Model of the IFS of South Africa for the period 1990Q1-2011Q1 and to forecast its value over the period 2011Q2-2017Q1. It is shown that the IFS could capture the disturbances in the financial system and the BVAR models with the non-informative and Minnesota priors could predict the future dynamics of IFS with sufficient accuracy.

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File URL: http://mpra.ub.uni-muenchen.de/42173/1/MPRA_paper_42173.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 42173.

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Date of creation: Apr 2012
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Handle: RePEc:pra:mprapa:42173
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