Near-Coincident Indicators of Systemic Stress

By Ivailo Arsov, Elie Canetti, Laura E. Kodres, Srobona Mitra

May 17, 2013

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Ivailo Arsov, Elie Canetti, Laura E. Kodres, and Srobona Mitra. Near-Coincident Indicators of Systemic Stress, (USA: International Monetary Fund, 2013) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

The G-20 Data Gaps Initiative has called for the IMF to develop standard measures of tail risk, which we identify in this paper with systemic risk. To understand the conditions under which tail risk is present, it is first necessary to develop a measure of what constitutes a systemic stress, or tail, event. We develop such a measure and uses it to assess the performance of eleven near-term systemic risk indicators as ‘early’ warning of distress among top financial institutions in the United States and the euro area. Two indicators perform particularly well in both regions, and a couple of other simple indicators do well across a number of criteria. We also find that the sizes of institutions do not necessarily correspond with their contribution to spillover risk. Some practical guidance for policies is provided.

Subject: Banking, Cyclical indicators, Economic growth, Financial crises, Financial regulation and supervision, Financial sector policy and analysis, Financial services, Liquidity risk, Systemic risk, Yield curve

Keywords: A number of financial institutions, Abnormal returns, Bank Austria, Bank CD, Bank default, Bank name abbreviation, BNP Paribas, Coincident Indicator, Credit creation, Cyclical indicators, DD bank, Early Warning, Financial Stress, Global, JPoD indicator, Liquidity risk, Name abbreviation, Negative equity, Systemic Risk, Tail Risk, WP, Yield curve

Publication Details

Pages:

33
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2013/115
Stock No:

WPIEA2013115
ISBN:

9781484343784
ISSN:

1018-5941

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