A financially stressed euro area

Marcus Kappler and Frauke Schleer

Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), 2017, vol. 11, No 2017-6, 37 pages

Abstract: The authors analyse 149 newly compiled monthly time series on financial market stress conditions in the euro area. With the aid of a factor model they find different sources of financial stress that are important for selecting and preparing the appropriate policy response. The existence of a 'Periphery Banking Crisis' factor, a 'Stress' factor and a 'Yield Curve' factor seems to explain the bulk of volatility in recent euro area financial sector data. Moreover, by a real-time forecasting exercise, the authors show that including additional factors-that reflect financial sector conditions-improves forecasts of economic activity at short horizons.

Keywords: financial stress; dynamic factor models; financial crisis; euro area; forecasting (search for similar items in EconPapers)
JEL-codes: C38 G01 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: A financially stressed Euro area (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifweej:20176

DOI: 10.5018/economics-ejournal.ja.2017-6

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