Financial Conditions Indicators for Brazil

Wagner Gaglianone and Waldyr Areosa

No 435, Working Papers Series from Central Bank of Brazil, Research Department

Abstract: In this paper, we propose a methodology to construct a Financial Conditions Indicator (FCI) based on Brave and Butters (2011) and Aramonte et al. (2013). The main idea is to use a selected set of economic and financial time series and aggregate their information content into a single index that summarizes the overall financial conditions of the economy. This approach can be further employed to forecast economic activity. An empirical exercise for Brazil is provided to illustrate the methodology, in which a modified IS-type equation (substituting the interest rate by the FCI) is employed to point forecast the output gap. In addition, a standard quantile regression technique (e.g. Koenker, 2005) is used to construct density forecasts and generate fan charts of future economic activity. A risk analysis is conducted within this setup in order to compute conditional probabilities of the output growth to be above/below a given scenario.

Date: 2016-05
New Economics Papers: this item is included in nep-for
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.bcb.gov.br/content/publicacoes/WorkingPaperSeries/wps435.pdf (application/pdf)

Related works:
Working Paper: Financial Conditions Indicator for Brazil (2017)
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:bcb:wpaper:435

Access Statistics for this paper

More papers in Working Papers Series from Central Bank of Brazil, Research Department
Bibliographic data for series maintained by Rodrigo Barbone Gonzalez ().