The OFR Financial Stress Index

Abstract

We introduce a financial stress index developed by the Office of Financial Research (OFR FSI) and detail its purpose, construction, interpretation, and use in financial market monitoring. Using a logistic regression framework and dates of government intervention in the financial system as a proxy for stress events, we find that the OFR FSI performs well in identifying systemic financial stress. In addition, we find that the OFR FSI leads the Chicago Fed National Activity Index in a Granger causality analysis, suggesting that increases in financial stress help predict decreases in economic activity.

Keywords: financial stress, financial stress index, financial system stability, systemic risk

JEL Classification: G01, G10, C22, C52, E32, E44, E66