EconPapers    
Economics at your fingertips  
 

Financial stress and economic dynamics: An application to France

Sofiane Aboura and Björn van Roye
Additional contact information
Sofiane Aboura: DRM - Dauphine Recherches en Management - Université Paris-Dauphine - CNRS - Centre National de la Recherche Scientifique

Working Papers from HAL

Abstract: In this paper, we develop a financial stress index for France that can be used as a real-time composite indicator for the state of financial stability in France. We take 17 financial variables from different market segments and extract a common stress component using a dynamic approximate factor model. We estimate the model with a combined maximum-likelihood and Expectation-Maximization algorithm allowing for mixed frequencies and an arbitrary pattern of missing data. Using a Markov-Switching Bayesian VAR model, we show that an episode of high financial stress is associated with significantly lower economic activity, whereas movements in the index in a low-stress regime do not incur significant changes in economic activity. Therefore, this index can be used in real time as an early warning signal of systemic risk in the French financial sector.

Keywords: Financial Systems; Financial Stress Index; Recessions; Slowdowns; Financial Crises (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec
Date: 2017-05-23
Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01526393
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)
https://hal.archives-ouvertes.fr/hal-01526393/document (application/pdf)

Related works:
Working Paper: Financial stress and economic dynamics: An application to France (2013) Downloads
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:hal:wpaper:hal-01526393

Access Statistics for this paper

More papers in Working Papers from HAL
Bibliographic data for series maintained by CCSD ().

 
Page updated 2020-01-17
Handle: RePEc:hal:wpaper:hal-01526393