EconPapers    
Economics at your fingertips  
 

Measuring the instability of China's financial system: Indices construction and an early warning system

Lixin Sun () and Yuqin Huang ()

Economics - The Open-Access, Open-Assessment E-Journal, 2016, vol. 10, No 2016-19, 41 pages

Abstract: In this paper, employing several econometric techniques, the authors construct a financial stress index (CNFSI) and a financial conditions index (CNFCI) to measure the instability of China's financial system. The indices are based on the monthly data collected from China's inter-bank markets, stock markets, foreign exchange markets and debt markets. Using these two indices, the authors identify the episodes of systemic financial stress, and then evaluate the indices. The empirical results suggest that the CNFSI performs better than the CNFCI. Furthermore, the authors propose four leading indicators for monitoring China's financial instability, and provide a primary early warning system for China's macroprudential regulations. Finally, they conduct a test to evaluate the predictive power of the CNFSI and the early warning system with reference to the 2015 episode. Their results suggest that both work well.

Keywords: financial stress index; financial conditions index; China's financial system; leading indicators; early warning system (search for similar items in EconPapers)
JEL-codes: G18 C43 E44 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://dx.doi.org/10.5018/economics-ejournal.ja.2016-19
https://www.econstor.eu/bitstream/10419/144159/1/863126960.pdf (application/pdf)

Related works:
Working Paper: Measuring the instability of China's financial system: Indices construction and an early warning system (2016) Downloads
Working Paper: Measuring the Instability of China’s Financial System: Indices Construction and an Early Warning System (2014) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifweej:201619

Access Statistics for this article

Economics - The Open-Access, Open-Assessment E-Journal is currently edited by Dennis J. Snower

More articles in Economics - The Open-Access, Open-Assessment E-Journal from Kiel Institute for the World Economy (IfW) Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().

 
Page updated 2019-04-24
Handle: RePEc:zbw:ifweej:201619