Financial Conditions Index as a predictor in low-inflation environment

Oreste Napolitano (), Salvatore Capasso and Ana Laura Viveros ()
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Ana Laura Viveros: Universidad Nacional Autónoma de México

No 10012456, Proceedings of International Academic Conferences from International Institute of Social and Economic Sciences

Abstract: The nature of the ?nancial crisis in 2008 imposed new challenges for macroe-conomic theory and policy-makers. In this context, a ?nancial conditions index(FCI) could be a useful tool to identify the state of ?nancial conditions in acountry. We construct a FCI for Mexico to analyse the role of prices of ?nancialassets in the formulation of monetary policy under the in?ation-targeting regime.We estimate FCIs by two di?erent methodologies using monthly data from 1990to 2017. The variables are considered according to the mechanismof transmission of monetary policy and incorporating other important ?nancialvariables, those characterise developing countries. Our results show that FCI isa good predictor in a low/non-in?ation environment.

Keywords: Financial Conditions; Monetary policy; Vector autoregressive models (search for similar items in EconPapers)
JEL-codes: C01 E52 E58 (search for similar items in EconPapers)
Pages: 1 page
Date: 2020-02
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Published in Proceedings of the Proceedings of the 53rd International Academic Conference, Dubai, Feb 2020, pages 21-21

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Persistent link: https://EconPapers.repec.org/RePEc:sek:iacpro:10012456

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