Measuring financial stability in the presence of energy shocks

Javier Sánchez-García, Raffaele Mattera (), Salvador Cruz-Rambaud and Roy Cerqueti
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Javier Sánchez-García: UAL - Universidad de Almería
Raffaele Mattera: UNIROMA - Università degli Studi di Roma "La Sapienza" = Sapienza University [Rome]
Salvador Cruz-Rambaud: UAL - Universidad de Almería
Roy Cerqueti: GRANEM - Groupe de Recherche Angevin en Economie et Management - UA - Université d'Angers - Institut Agro Rennes Angers - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement, UNIROMA - Università degli Studi di Roma "La Sapienza" = Sapienza University [Rome]

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Abstract: The Russia–Ukraine conflict highlighted how important energy is for the surveillance of economies worldwide. Both war and economic sanctions inevitably affected energy-related commodity prices. Although shocks in energy commodities are known to have an effect on financial stability, this information is not included in existing financial stability indicators. In this paper, we first provide empirical evidence on the existing relationship between energy-related commodities and financial stability in the EU, UK and US, as well as their importance in the forecast of economic downturns. Based on this evidence, we propose a new composite indicator of financial stability which incorporates relevant information from the energy markets. The suitability of the new composite indicator is assessed by its ability to track financial, economic, and energy crises.

Keywords: Energy market; Financial stress; Dynamic Factor Model (DFM); Composite indicators; Macro-financial linkages; Real-time macroeconomics (search for similar items in EconPapers)
Date: 2024-11
Note: View the original document on HAL open archive server: https://univ-angers.hal.science/hal-05115049v1
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Published in Energy Economics, 2024, 139, pp.107922. ⟨10.1016/j.eneco.2024.107922⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05115049

DOI: 10.1016/j.eneco.2024.107922

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