Financial condition indices for emerging market economies: can Google help?

Fabrizio Ferriani and Andrea Giovanni Gazzani

No 653, Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: We compare different approaches to constructing financial condition indices (FCIs) for major emerging market economies (EMEs). We further test whether measures of web-search intensity for keywords related to financial tensions can complement the information content of traditional financial variables. We find that an index constructed as a simple average of key financial variables augmented with data from Google searches outperforms several alternative definitions of FCIs in explaining business cycle fluctuations and capital flows episodes. These results hold true when controlling for proxies of the global financial cycle, highlighting that local financial market conditions are important for the macroeconomic performance of EMEs

Keywords: financial condition index; emerging markets; Google search; principal component analysis; VAR; quantile regressions (search for similar items in EconPapers)
JEL-codes: C51 E44 F30 G01 G15 (search for similar items in EconPapers)
Date: 2021-11
New Economics Papers: this item is included in nep-big, nep-fdg, nep-ifn and nep-mac
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Journal Article: Financial condition indices for emerging market economies: Can Google help? (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:opques:qef_653_21

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