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A SINGLE COMPOSITE FINANCIAL STRESS INDICATOR AND ITS REAL IMPACT IN THE EURO AREA
Author(s) -
Islami Mevlud,
KurzKim JeongRyeol
Publication year - 2014
Publication title -
international journal of finance and economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 39
eISSN - 1099-1158
pISSN - 1076-9307
DOI - 10.1002/ijfe.1483
Subject(s) - sovereign debt , economics , real economy , financial crisis , volatility (finance) , composite index , index (typography) , sovereignty , debt crisis , warning system , composite indicator , monetary economics , debt , financial system , macroeconomics , finance , engineering , computer science , politics , world wide web , political science , law , aerospace engineering
ABSTRACT In this paper, we construct a single composite financial stress indicator (FSI), which aims to predict developments in the real economy in the euro area. Our FSI was shown to perform better than the Euro STOXX 50 volatility index for the recent banking crisis and the euro‐area sovereign debt crisis and to be able to serve as an early warning indicator for negative impacts of financial stress on the real economy. Copyright © 2013 John Wiley & Sons, Ltd.