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Leading indicators of financial stress: New evidence

Bořek Vašíček (), Diana Zigraiova (), Marco Hoeberichts (), Robert Vermeulen, Katerina Smidkova and Jakob de Haan ()

DNB Working Papers from Netherlands Central Bank, Research Department

Abstract: This paper examines which variables have predictive power for financial stress in a sample of 25 OECD countries, using a recently constructed Financial Stress Index (FSI). First, we employ Bayesian model averaging to identify leading indicators of our FSI. Next, we use those indicators as explanatory variables in a panel model for all our countries and in models at the individual country level. It turns out that panel models can hardly explain FSI dynamics. Although better results are achieved in models estimated at the country level, our findings suggest that (increases in) financial stress is (are) hard to predict out-of-sample.

Keywords: financial stress index; Bayesian model averaging; early warning indicators (search for similar items in EconPapers)
JEL-codes: E5 G10 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-for, nep-mac and nep-rmg
Date: 2015-06
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Journal Article: Leading indicators of financial stress: New evidence (2017) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:dnb:dnbwpp:476

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