Financial Stress Indices: An Introduction

The Spanish Review of Financial Economics, Volume 14, Issue 1, pp. 1–4, 2016

7 Pages Posted: 17 Apr 2016

Date Written: February 19, 2016

Abstract

Financial stress indices quantify the current stress level in the financial system as a whole or major parts of it by compressing a number of indicators measuring stress in individual market segments into a composite indicator. Despite the fact that composite indicators have been used for other purposes for a long time (e.g., monetary and financial conditions indices), financial stress indices have become a popular tool only in recent years, spurred by the financial crisis. The present paper is a slightly revised version of what has been published as the editorial of a special issue of The Spanish Review of Financial Economics. The special issue is dedicated to three new variants of a financial stress index for the Spanish and the Italian markets, respectively. Before briefly summarizing the three papers introducing these new indicators, I first present and discuss the ECB’s financial stress index which I developed together with two colleagues (D. Holló, M. Kremer and M. Lo Duca (2012), CISS - A Composite Indicator of Systemic Stress in the Financial System, ECB Working Paper No. 1426, March). This may help better understand some features of the three indices since all of them build, at least to some extent, on our indicator concept. I also show for the first time a time series of a CISS for the US financial system that starts in January 1973.

Keywords: Financial Stress Index; Composite Index of Systemic Stress (CISS); Systemic Risk; Financial Stability

JEL Classification: C82; E44

Suggested Citation

Kremer, Manfred, Financial Stress Indices: An Introduction (February 19, 2016). The Spanish Review of Financial Economics, Volume 14, Issue 1, pp. 1–4, 2016. Available at SSRN: https://ssrn.com/abstract=2763490

Manfred Kremer (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
+49 69 1344 7065 (Phone)

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