Financial Stress Indicators for Small, Open, Highly Euroised Countries – the Case of Croatia

Mirna Dumičić ()
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Mirna Dumičić: The Croatian National Bank, Croatia

No 41, Working Papers from The Croatian National Bank, Croatia

Abstract: The main objective of this paper is to construct high-frequency composite indicators of financial stress for Croatia that will enable the monitoring of the total level of financial stress and its components on the domestic financial market. Emphasis is placed on the choice of variables appropriate to small, open, highly euroised economies characterised by bank-centric financial systems dominantly owned by foreign banks. Apart from that, these countries are often characterized by shallow financial markets that because of the shortfall of domestic saving have to a great extent become dependent on foreign capital. Timely identification of stress disruptions on the financial markets and understanding of the specific channels by which they might spill over to the rest of the financial system and onto real economy are a precondition for effective reactions on the part of economic policy makers.

Keywords: financial stress; financial stability; financial markets; systemic risk; composite index (search for similar items in EconPapers)
JEL-codes: E44 E50 G10 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2014-12
New Economics Papers: this item is included in nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:hnb:wpaper:41

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