An Indicator of Macro-Financial Stress for Italy

28 Pages Posted: 7 Aug 2019

Date Written: April 29, 2019


We develop a measure of systemic stress for the Italian financial markets (FCI-IT) that aggregates information from five major segments of the whole financial system, i.e. the money market, the bond market, the equity market, the foreign exchange market and the market for stocks of financial intermediaries. The index builds on the methodology of the Composite Indicator of Systemic Stress (CISS) developed by Hollò, Kremer and Lo Duca (2012) for the euro area. We set up a simple TVAR model to verify whether the proposed measure is able to provide significant and consistent information about the evolution of macroeconomic variables when financial conditions change. The indicator’s performance is evaluated against two alternative metrics publicly available (e.g. the euro-area CISS and the Italian CLIFS). Our results show that FCI-IT behaves quite similarly to the other indexes considered in signalling high-stress periods, but it also identifies episodes of financial distress for the Italian economy which are disregarded by the other two. During periods of high stress, the effects of financial shocks on gross domestic product are significant.

Keywords: financial stability, systemic risk, financial condition index

JEL Classification: G01, G10, G20, E44

Suggested Citation

Miglietta, Arianna and Venditti, Fabrizio, An Indicator of Macro-Financial Stress for Italy (April 29, 2019). Bank of Italy Occasional Paper No. 497, April 2019, Available at SSRN: or

Arianna Miglietta (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184

Fabrizio Venditti

Bank of Italy ( email )

Via Nazionale 91
00184 Roma

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