A Spanish Financial Market Stress Indicator (FMSI)

Leticia Estévez Cerqueira and María Isabel Cambón Murcia

CNMV Working Papers from CNMV- Spanish Securities Markets Commission - Research and Statistics Department

Abstract: This paper introduces a Spanish Financial Market Stress Indicator (FMSI) similar to the “Composite Indicator of Systemic Stress” that Holló, Kremer and Lo Duca (2012) proposed for the euro area as a whole. Supervisors and regulators recognised the need to improve the process of identification, management and mitigation of systemic risk after the economic and financial crisis starting in mid-2007. In this context, this paper presents an indicator which represents a real-time measure of systemic risk and tries to quantify stress in the Spanish financial system. The contribution of each financial market segment (bond market, equity market, money market, financial intermediaries, forex markets and derivatives) to the total stress in the system is also provided. The methodology takes into account time-varying correlations between market segments. The study analyses the ability of the FMSI to identify past periods of high financial stress and presents two econometric approaches with the aim of classifying observations into different stress regimes and of determining if financial stress has a negative impact on the real economy.

Keywords: systemic risk; financial crisis; composite indicator; real economy (search for similar items in EconPapers)
JEL-codes: E44 G01 G10 G20 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (1)

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