A Financial Conditions Index for Poland

Giang Ho and Yinqiu Lu

No 2013/252, IMF Working Papers from International Monetary Fund

Abstract: This paper constructs a financial conditions index for Poland to explore the link between financial conditions and real economic activity. The index in constructed by applying two complementary approaches—factor analysis and vector auto-regression approach. We evaluate the index’s forecasting performance against a composite leading indicator developed by the OECD. We found that the FCI is highly correlated with GDP growth, attesting to the importance of financial sector in Poland’s economy. In-sample and out-of-sample forecasting exercises indicate that the FCI can outperform the CLI in predicting near-term GDP growth.

Keywords: WP; VAR FCI; lending; rate; WIBOR; Financial conditions index; factor analysis; Poland; vector auto-regression; constructed FCI; FCI weight; forecasting property; factor FCI; lending standard; Vector autoregression; Bond yields; Loans; Sovereign bonds; Europe; Global (search for similar items in EconPapers)
Pages: 16
Date: 2013-12-19
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Citations: View citations in EconPapers (11)

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