Measuring Systemic Financial Stress and its Impact on the Macroeconomy

Manfred Kremer () and Sulkhan Chavleishvili

VfS Annual Conference 2021 (Virtual Conference): Climate Economics from Verein für Socialpolitik / German Economic Association

Abstract: This paper proposes a general statistical framework for systemic financial stress indexes. Several existing index designs can be represented as special cases. We introduce a daily variant of the ECB's CISS for the euro area and the US. The CISS aggregates a representative set of stress indicators using their time-varying cross-correlations as systemic weights, like portfolio risk is computed from the risk characteristics of individual assets. A bootstrap algorithm delivers test statistics. A linear VAR suggests that systemic stress is the main cause behind the Great Recession, while its contribution to the Covid-19 crisis appears limited. A quantile VAR features stronger real effects of financial stress in the worst states of the economy.

Keywords: Financial crisis; Financial stress index; Macro-financial linkages; Quantile vectorautoregression; Systemic risk (search for similar items in EconPapers)
JEL-codes: C14 C31 C43 C53 E44 G01 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-cfn, nep-cwa, nep-fdg and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc21:242346

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