Towards a Macro-Prudential Leading Indicators Framework for Monitoring Financial Vulnerability

66 Pages Posted: 23 Aug 2003

See all articles by Biswa N. Bhattacharyay

Biswa N. Bhattacharyay

Asian Development Bank Institute; Asian Development Bank; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: August 2003

Abstract

The 1997 Asian financial crisis has revealed the limitations of the current state of monetary and financial monitoring system in most Asian countries in comprehensively addressing financial and monetary problems and issues. This paper attempts to propose a macroprudential indicators (MPI) framework for monitoring vulnerability of financial markets. A literature survey on studies leading indicators has been presented. An illustrative and simple framework for analysis and interpretation of core set of 22 leading indicators (that were identified from 67 commonly agreed Asian Development Bank Indicators for selected Asia-Pacific countries, namely Fiji, Indonesia, the Philippines, Thailand, Viet Nam, and Taiwan, Province of China) has been presented using annual time-series data for the afore-mentioned countries. A correlation and volatility analysis of Thailand's annual and quarterly data (1994-2002) has also been performed in order to propose a simple methodology for constructing benchmarks for early warning signals and for developing a composite indicators. This above analysis carried out in this paper highlights the usefulness of MPIs as a tool for monitoring financial vulnerability.

JEL Classification: F3, E0, G2

Suggested Citation

Bhattacharyay, Biswa Nath., Towards a Macro-Prudential Leading Indicators Framework for Monitoring Financial Vulnerability (August 2003). CESifo Working Paper Series No. 1015. Available at SSRN: https://ssrn.com/abstract=436622

Biswa Nath. Bhattacharyay (Contact Author)

Asian Development Bank Institute ( email )

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CESifo (Center for Economic Studies and Ifo Institute)

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