Forecasting Financial Stress
Jan Willem Slingenberg
De Nederlandsche Bank
Jakob De Haan
University of Groningen - Faculty of Economics and Business; De Nederlandsche Bank; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
April 1, 2011
De Nederlandsche Bank Working Paper No. 292
This paper uses a Financial Stress Index (FSI) for 13 OECD countries to examine which variables can help predicting financial stress. A stress index measures the current state of stress in the financial system and summarizes it in a single statistic. We employ three criteria for indicators to be used in constructing a multi-country FSI (the index covers the entire financial system, indicators used are available at a high frequency for many countries for a long period, and are comparable) to come up with our FSI. Our results suggest that financial stress is hard to predict. Only credit growth has predictive power for most countries. Several other variables have predictive power for some countries, but not for others.
Number of Pages in PDF File: 33
Keywords: financial stress index, predicting financial stress
JEL Classification: E5, G10working papers series
Date posted: November 1, 2011
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