Cyclical Patterns of Systemic Risk Metrics: Cross-Country Analysis

By Plamen K Iossifov, Tomas Dutra Schmidt

February 5, 2021

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Format: Chicago

Plamen K Iossifov, and Tomas Dutra Schmidt. Cyclical Patterns of Systemic Risk Metrics: Cross-Country Analysis, (USA: International Monetary Fund, 2021) accessed December 26, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

We analyze a range of macrofinancial indicators to extract signals about cyclical systemic risk across 107 economies over 1995–2020. We construct composite indices of underlying liquidity, solvency and mispricing risks and analyze their patterns over the financial cycle. We find that liquidity and solvency risk indicators tend to be counter-cyclical, whereas mispricing risk ones are procyclical, and they all lead the credit cycle. Our results lend support to high-level accounts that risks were underestimated by stress indicators in the run-up to the 2008 global financial crisis. The policy implications of conflicting risk signals would depend on the phase of the credit cycle.

Subject: Credit cycles, Liquidity risk, Private debt, Solvency, Systemic risk

Keywords: Credit cycle., Interest rate, Mispricing risk, Risk index, Risk indices, Risk metrics, Solvency risk, WP

Publication Details

Pages:

40
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2021/028
Stock No:

WPIEA2021028
ISBN:

9781513568652
ISSN:

1018-5941

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