Financial Stress Indices and Financial Crises

35 Pages Posted: 11 Apr 2015

See all articles by Robert Vermeulen

Robert Vermeulen

De Nederlandsche Bank

Marco Hoeberichts

De Nederlandsche Bank - Research Department

Borek Vasicek

Czech National Bank (CNB); European Union - Directorate General for Economic and Financial Affairs (DG ECFIN)

Diana Zigraiova

Czech National Bank (CNB); Charles University in Prague

Katerina Smídková

Czech National Bank (CNB) (Deceased)

Jakob de Haan

University of Groningen - Faculty of Economics and Business; De Nederlandsche Bank; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: April 2, 2015

Abstract

This paper develops a Financial Stress Index (FSI) for 28 OECD countries and examines its relationship to crises using a novel database for financial crises. A stress index measures the current state of stress in the financial system and summarizes it in a single statistic. Our results suggest that even though our FSI is clearly related to the occurrence of crises, there is only a weak relationship between the FSI and the onset of a crisis, notably the onset of a banking crisis. Policymakers should therefore be aware of the limited usefulness of FSIs as an early warning indicator.

Keywords: financial stress index, financial crises, developed countries, early warning indicators

JEL Classification: E5, G10

Suggested Citation

Vermeulen, Robert and Hoeberichts, Marco M. and Vasicek, Borek and Zigraiova, Diana and Smídková, Katerina and de Haan, Jakob, Financial Stress Indices and Financial Crises (April 2, 2015). De Nederlandsche Bank Working Paper No. 469. Available at SSRN: https://ssrn.com/abstract=2591888 or http://dx.doi.org/10.2139/ssrn.2591888

Robert Vermeulen

De Nederlandsche Bank ( email )

P.O. Box 98
1000 AB Amsterdam
Netherlands

Marco M. Hoeberichts

De Nederlandsche Bank - Research Department ( email )

P.O. Box 98
1000 AB Amsterdam
Netherlands
+31-20-524 2890 (Phone)
+31-20-524 2529 (Fax)

Borek Vasicek

Czech National Bank (CNB) ( email )

Na Prikope 28
CZ-11503 Praha 1
Czech Republic

European Union - Directorate General for Economic and Financial Affairs (DG ECFIN) ( email )

BU-1 05/190
Brussels, Bruxelles B-1049
Belgium

Diana Zigraiova

Czech National Bank (CNB) ( email )

Na Prikope 28
CZ-11503 Praha 1
Czech Republic

Charles University in Prague ( email )

Celetná 13
Praha 1, 116 36
Czech Republic

Katerina Smídková

Czech National Bank (CNB) (Deceased)

Jakob de Haan (Contact Author)

University of Groningen - Faculty of Economics and Business ( email )

PO Box 800
Groningen, 9700 AV
Netherlands
+31 0 50 3633706 (Fax)

De Nederlandsche Bank ( email )

P.O. Box 98
Amsterdam, 1000 AB
Netherlands

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

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