A Quantitative Assessment of Financial Conditions in Asia

22 Pages Posted: 27 Jul 2011

See all articles by Carolina Osario

Carolina Osario

affiliation not provided to SSRN

D. Filiz Unsal

International Monetary Fund (IMF) - Research Department

Runchana Pongsaparn

International Monetary Fund (IMF)

Date Written: July 2011

Abstract

We propose a new Financial Condition Index (FCI) for Asian economies based on two different methodologies: a VAR model and a Dynamic Factor Model. The paper shows that this index has predictive power in forecasting GDP growth and may be thus used as a leading indicator. Based on the FCI, financial conditions in Asia tightened substantially earlier in the global crisis, reflecting losses in the stock markets and tighter credit conditions. In early 2010, financial conditions in Asia recovered rapidly and reached precrisis levels, thanks to accommodative monetary policies and a rapid rebound in regional equity markets.

Suggested Citation

Osario, Carolina and Unsal, D. Filiz and Pongsaparn, Runchana, A Quantitative Assessment of Financial Conditions in Asia (July 2011). IMF Working Paper No. 11/170, Available at SSRN: https://ssrn.com/abstract=1895960

Carolina Osario

affiliation not provided to SSRN ( email )

D. Filiz Unsal (Contact Author)

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States

Runchana Pongsaparn

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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