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Cyclical Patterns of Systemic Risk Metrics: Cross-Country Analysis

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  • Mr. Plamen K Iossifov

Abstract

We analyze a range of macrofinancial indicators to extract signals about cyclical systemic risk across 107 economies over 1995–2020. We construct composite indices of underlying liquidity, solvency and mispricing risks and analyze their patterns over the financial cycle. We find that liquidity and solvency risk indicators tend to be counter-cyclical, whereas mispricing risk ones are procyclical, and they all lead the credit cycle. Our results lend support to high-level accounts that risks were underestimated by stress indicators in the run-up to the 2008 global financial crisis. The policy implications of conflicting risk signals would depend on the phase of the credit cycle.

Suggested Citation

  • Mr. Plamen K Iossifov, 2021. "Cyclical Patterns of Systemic Risk Metrics: Cross-Country Analysis," IMF Working Papers 2021/028, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2021/028
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    Keywords

    credit cycle.; WP; risk metrics; risk index; risk indices; solvency risk; interest rate; mispricing risk;
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