Dynamic monitoring of financial security risks: A novel China financial risk index and an early warning system

Wenyu Zhang

Economics Letters, 2024, vol. 234, issue C

Abstract: From the perspective of financial risk–a more macro level, this letter selected three levels of indicators which reflect emerging risks, synthesized seven dimensional indices, and developed a China financial risk index using two different methods, identifying the risk regime by Markov switching model. The convolution for neural network–long short-term memory model was used to construct an early warning system for financial risks. The model was optimized using regime-based prediction. The empirical results show that the composite dynamic monitoring system and the early warning system have good effects.

Keywords: Financial risk; China financial risk index; Convolution for neural network-long short-term memory model (search for similar items in EconPapers)
JEL-codes: C45 E44 G10 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:234:y:2024:i:c:s0165176523004718

DOI: 10.1016/j.econlet.2023.111445

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