Using Policy Intervention to Identify Financial Stress

24 Pages Posted: 25 Jan 2012

See all articles by Mark A. Carlson

Mark A. Carlson

Board of Governors of the Federal Reserve System

Kurt F. Lewis

Board of Governors of the Federal Reserve System

William R. Nelson

Board of Governors of the Federal Reserve System

Date Written: January 1, 2012

Abstract

This paper describes the construction of a financial stress index. This stress index differs from other indexes in that it incorporates the co-movement and volatility of financial series as well as the levels of the series. Our index also uses past experience more than others to guide the assessment about which characteristics of the data suggest financial stress exists. In addition to describing the construction of our financial stress index, we spend some time discussing issues relevant to the general construction of stress indexes.

Keywords: Financial stress, financial markets, financial institutions

JEL Classification: E59, G01

Suggested Citation

Carlson, Mark A. and Lewis, Kurt F. and Nelson, William Richard, Using Policy Intervention to Identify Financial Stress (January 1, 2012). FEDS Working Paper No. 2012-02, Available at SSRN: https://ssrn.com/abstract=1991854 or http://dx.doi.org/10.2139/ssrn.1991854

Mark A. Carlson (Contact Author)

Board of Governors of the Federal Reserve System ( email )

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Kurt F. Lewis

Board of Governors of the Federal Reserve System ( email )

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Washington, DC 20551
United States

HOME PAGE: http://kurtflewis.com

William Richard Nelson

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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