A Financial Systemic Stress Index for Greece

48 Pages Posted: 12 Aug 2013

See all articles by Dimitrios P. Louzis

Dimitrios P. Louzis

Athens University of Economics and Business; Bank of Greece

Angelos T. Vouldis

European Central Bank (ECB); Bank of Greece

Multiple version iconThere are 2 versions of this paper

Date Written: July 2013

Abstract

The paper develops a financial systemic stress index (FSSI) for Greece. We present a methodology for constructing and evaluating a systemic stress index which: i) adopts the suggestion of Hollo et al. (2012) [Hollo, Kremer, and Lo Duca (2012) "CISS – A Composite Indicator of Systemic Stress in the Financial System" ECB Working Paper 1426] to incorporate time-varying correlations between different market segments, and uses a multivariate GARCH approach which is able to capture abrupt changes in correlations; ii) utilizes both market and balance sheet data; and iii) evaluates the FSSI utilizing the results of a survey, conducted among financial experts, in order to construct a benchmark chronology of financial crises for Greece, which in turn is used to investigate whether changes in the FSSI are good indicators for financial crises. The results show that the FSSI is able to provide a precise periodization of crises.

Keywords: Financial crisis, systemic stress, stress index, multivariate GARCH

JEL Classification: G01, G10, G20, E44

Suggested Citation

Louzis, Dimitrios P. and Vouldis, Angelos T., A Financial Systemic Stress Index for Greece (July 2013). ECB Working Paper No. 1563. Available at SSRN: https://ssrn.com/abstract=2284244

Dimitrios P. Louzis (Contact Author)

Athens University of Economics and Business ( email )

47A Evelpidon
Athens, 11362
Greece

Bank of Greece ( email )

21 E. Venizelos Avenue
GR 102 50 Athens
Greece

Angelos T. Vouldis

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Bank of Greece ( email )

21 E. Venizelos Avenue
GR 102 50 Athens
Greece

HOME PAGE: http://www.bankofgreece.gr

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