The Financial Activity Index

Atsushi Ishikawa, Koichiro Kamada, Kazutoshi Kan, Ryota Kojima, Yoshiyuki Kurachi, Kentaro Nasu and Yuki Teranishi
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Atsushi Ishikawa: Bank of Japan
Kazutoshi Kan: Bank of Japan
Ryota Kojima: Bank of Japan
Kentaro Nasu: Bank of Japan

No 12-E-4, Bank of Japan Working Paper Series from Bank of Japan

Abstract: The financial activity index (FAIX) introduced in this paper is a selection of financial indicators that borrow from prior literature on early bubble warnings and are particularly adept at explaining the bubble occurred in Japan starting in the 1980s. Our index comprises 10 financial indicators and is envisioned for use from two main perspectives. First, it is used for a multi-faceted analysis of overheating and overcooling of financial activity through individual indicators in each segment. Second, it is used to monitor from a macroeconomic perspective the dynamics of bubble creation and destruction through an aggregation of the indicators. The index, with these characteristics, should be an effective tool for detecting the accumulation of financial imbalances.

Date: 2012-04-18
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