A new index of financial conditions

Gary Koop and Dimitris Korobilis

No 1307, Working Papers from University of Strathclyde Business School, Department of Economics

Abstract: We use factor augmented vector autoregressive models with time-varying coefficients to construct a financial conditions index. The time-variation in the parameters allows for the weights attached to each .financial variable in the index to evolve over time. Furthermore, we develop methods for dynamic model averaging or selection which allow the financial variables entering into the FCI to change over time. We discuss why such extensions of the existing literature are important and show them to be so in an empirical application involving a wide range of .financial variables.

Keywords: financial stress; dynamic model averaging; forecasting (search for similar items in EconPapers)
JEL-codes: C11 C32 C52 C53 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2013-06
New Economics Papers: this item is included in nep-ban and nep-ifn
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Citations: View citations in EconPapers (14)

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Related works:
Journal Article: A new index of financial conditions (2014)
Working Paper: A New Index of Financial Conditions (2013)
Working Paper: A New Index of Financial Conditions (2013)
Working Paper: A new index of financial conditions
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Persistent link: https://EconPapers.repec.org/RePEc:str:wpaper:1307

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