Measuring financial conditions in major non-euro area economies

Giulio Nicoletti, Konstantin Wacker and David Lodge

No 1743, Working Paper Series from European Central Bank

Abstract: In this paper, we develop financial conditions indices (FCIs) for 3 industrialized (US, Japan, UK) and 5 emerging (China, Brazil, Russia, India, Turkey) economies. The FCIs are formed as the principal component of a range of financial series for each country and are constructed to account for fluctuations in the business cycle. We show that these FCIs can help predict growth developments and thereby provide a potential leading indicator for the external environment of the Euro area. While we draw upon established methodological considerations in the literature, our main contribution lies in providing FCIs which are available for a broad set of countries, including many emerging economies, and whose movements can intuitively be interpreted. This latter fact allows us to track developments in the 8 investigated financial markets over the last decade. JEL Classification: C43, E37, E44, G1

Keywords: FCI; financial conditions index; forecasting; principal component analysis (search for similar items in EconPapers)
Date: 2014-11
New Economics Papers: this item is included in nep-cis and nep-mac
Note: 574602
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20141743

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