Financial stress index: estimation and application in empirical researches in Ukraine

Vdovychenko, Artem and Oros, Galyna (2014): Financial stress index: estimation and application in empirical researches in Ukraine.

Abstract

The article is an overview of advanced scientific researches, dedicated to estimation financial stress index. It describes theoretical nature and practical applications of the indicator as a tool for monitoring the crisis on the financial markets. Based on the previous findings and taking into account specific demands of national finances, was offered own concept of estimation Ukrainian financial stress index. Authors demonstrate analytical capabilities of this index to analyze fiscal policy. Also was provided number of theoretical conclusions about regimes of fiscal policy and corresponding levels of financial security. According to the survey, fiscal policy behavior is the same on the extreme points of the interval of financial stress and makes diametric changes in main parameters, when reaches an average level.

• Item Type: MPRA Paper
• Language: English
• Keywords: financial stress index, financial crisis, episode of financial stress, fiscal policy, fiscal policy regime switches, non-linear fiscal reaction functions
• Subjects: H - Public Economics > H0 - General; O - Economic Development, Innovation, Technological Change, and Growth > O5 - Economywide Country Studies > O57 - Comparative Studies of Countries

References

Balakrishnan R. The transmission of financial stress from advanced to emerging economies / R. Balakrishnan, S.Danninger, S. Elekdag, I. Tytell // IMF Working Paper. – 2009. – WP/09/133. – Р. 1–52.

Cardarelli R. Financial stress, downturns, and recoveries / R. Cardarelli, S. Elekdag, S. Lall // IMF Working Paper. – 2009. – № 100. – 58 p.

Chant J. Financial Stability as a Policy Goal // Technical Report Essays on Financial Stability, Bank of Canada. – 2003. – № 95.

Corbet S. The European Financial Market Stress Index [Electronic resource] // International Journal of Economics and Financial Issues. – 2014. – Vol. 4. – № 1. – pp. 217–230.

ECB: Financial Stability Review. European Central Bank. – Frankfurt: Maine, 2009.

Ekinci A. Financial Stress Index for Turkey // Doğuş Üniversitesi Dergisi. – 2013. – № 14 (2). – P. 213–229.

Gadanecz B., Kaushik J. Measures of Financial Stability – A Review [Electronic resource] // IFC Bulletin. – 2009. – № 31. – P. 365–380.

Grimaldi M. B. Detecting and interpreting financial stress in the Euro area // European Central Bank (ECB) Working Paper. – 2010. – № 1214.

Haefcke S., Skarholt A. Swedish Financial Stress Index [Electronic resource] // Stockholm School of Economics. – 2011.

Hakkio C. S., Keeton W. R. Financial Stress: What Is It, How Can It Be Measured, and Why Does It Matter? // Federal Reserve Bank of Kansas City, Economic Review. – 2009. – Is. Q2. – P. 1–46.

Hollo D. CISS – a composite indicator of systemic stress in the financial system / D. Hollo, M. Kremer, M. Lo Duca // European Central Bank (ECB) Working paper series. – 2012. – №1426.

Illing M., Liu Y. An Index of Financial Stress for Canada [Electronic resource] // Bank of Canada Working Paper. – 2003. – № 14.

Illing M., Liu Y. Measuring Financial Stress in a Developed Country: an Application to Canada // Journal of Financial Stability. – 2006. – Vol. 2. – № 4. – P. 243–265.

Kliesen K. L. Disentangling Diverse Measures: A Survey of Financial Stress Indexes / K. L. Kliesen, M. T. Owyang, K. E. Vermann // Federal Reserve Bank of St. Louis Review. – 2012. – № 94 (5). – P. 369–397

Legrenzi G., Costas M. Modelling the fiscal reaction functions of the GIPS based on state-varying thresholds // Economics Letters. – 2013. – Vol. 121(3). – P. 384–389.

Louzis D. P., Vouldis A. T. A Financial Systemic Stress Index for Greece // European Central Bank (ECB) Working Paper. – 2013. – № 1563.

Manamperi N. P. A Comparative Analysis of US Financial Stress Indicators [Electronic resource] // Texas Tech University Working Paper. – 2013.

Oet M. V. The financial stress index: identification of systemic risk conditions / M. V. Oet, R. Eiben, T. Bianco, D. Gramlich, S. J. Ong // Working papers of the Federal Reserve Bank of Cleveland. – 2011. – № 1130. – P. 11–30.

Oet M.V. SAFE: An early warning system for systemic banking risk / M. V. Oet, T. Bianco, D. Gramlich, S.J. Ong // Journal of Banking and Finance. – 2013. – № 37 (11). – P. 4510–4533.

Park C., Mercado R. Determinants of Financial Stress in Emerging Market Economies [Electronic resource] // Asian Development Bank Economics Working Paper Series. – 2013. – № 356. – P. 199–224.

Slingenberg J. W., J. de Haan Forecasting Financial stress // De Nederlandsche Bank Working Paper. – 2011. – № 292. – P. 1–27.

Terasvirta T. Smooth transition regression modeling / T. Terasvirta. – Cambridge: University Press, 2004. – P. 223–243. [w] Applied Time Series Econometrics [red. H. Lütkepohl, M. Kratzig].– Cambridge: University Press, 2004.

Vermeulen R. Financial Stress Indices and Financial Crises / R. Vermeulen, M. Hoeberichts, D. Žigraiová, K. Šmídková, J. de Haan // de Nederlandsche Bank Working Paper, Forthcoming in Open Economies Review. – 2014.

Zeti A. A. Managing Financial Crisis in an Interconnected World: Anticipating the Mega Tidal Waves Per Jacobson Lecture [Electronic resource] / Basel, 29 June 2014.