Monitoring Financial Stability: A Financial Conditions Index Approach

22 Pages Posted: 11 Feb 2011

See all articles by Scott A. Brave

Scott A. Brave

Federal Reserve Bank of Chicago

R. Butters

Indiana University

Date Written: February 9, 2011


Monitoring financial stability requires an understanding of both how traditional and evolving financial markets relate to each other and how they relate to economic conditions. This article describes two new indexes of financial conditions that aim to quantify these relationships.

Keywords: Financial Conditions, Financial Crises, Financial Stress, Principal Component Analysis, Dynamic Factor Analysis, Financial Forecasting And Simulation, Index Numbers And Aggregation

Suggested Citation

Brave, Scott A. and Butters, R., Monitoring Financial Stability: A Financial Conditions Index Approach (February 9, 2011). Economic Perspectives, Vol. 35, No. 1, p. 22, 2011. Available at SSRN:

Scott A. Brave (Contact Author)

Federal Reserve Bank of Chicago ( email )

230 South LaSalle Street
Chicago, IL 60604
United States

R. Butters

Indiana University ( email )

1309 E. Tenth St.
Bloomington, IN 47405
United States

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