Measuring the instability of China's financial system: Indices construction and an early warning system

Lixin Sun and Yuqin Huang ()

No 2016-4, Economics Discussion Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: In this paper, employing several econometric techniques, the authors construct a financial stress index (CNFSI) and a financial conditions index (CNFCI) to measure the instability of China's financial system. The indices are based on the monthly data collected from China's inter-bank markets, stock markets, foreign exchange markets and debt markets. Using these two indices, they identify the episodes of systemic financial stress, and then evaluate the indices. The empirical results suggest that the CNFSI performs better than the CNFCI. Furthermore, the authors propose four leading indicators for monitoring China's financial instability, and provide a primary early warning system for China's macroprudential regulations.

Keywords: financial stress index; financial conditions index; China's financial system; leading indicators; early warning system (search for similar items in EconPapers)
JEL-codes: C43 E44 G18 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-cba, nep-cna, nep-mac and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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http://www.economics-ejournal.org/economics/discussionpapers/2016-4
https://www.econstor.eu/bitstream/10419/126162/1/846566443.pdf (application/pdf)

Related works:
Journal Article: Measuring the instability of China's financial system: Indices construction and an early warning system (2016)
Working Paper: Measuring the Instability of China’s Financial System: Indices Construction and an Early Warning System (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwedp:20164

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