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A Spanish Financial Market Stress Indicator (FMSI)

Author

Listed:
  • Leticia Estévez Cerqueira
  • María Isabel Cambón Murcia
Abstract
This paper introduces a Spanish Financial Market Stress Indicator (FMSI) similar to the “Composite Indicator of Systemic Stress” that Holló, Kremer and Lo Duca (2012) proposed for the euro area as a whole. Supervisors and regulators recognised the need to improve the process of identification, management and mitigation of systemic risk after the economic and financial crisis starting in mid-2007. In this context, this paper presents an indicator which represents a real-time measure of systemic risk and tries to quantify stress in the Spanish financial system. The contribution of each financial market segment (bond market, equity market, money market, financial intermediaries, forex markets and derivatives) to the total stress in the system is also provided. The methodology takes into account time-varying correlations between market segments. The study analyses the ability of the FMSI to identify past periods of high financial stress and presents two econometric approaches with the aim of classifying observations into different stress regimes and of determining if financial stress has a negative impact on the real economy.

Suggested Citation

  • Leticia Estévez Cerqueira & María Isabel Cambón Murcia, 2015. "A Spanish Financial Market Stress Indicator (FMSI)," CNMV Working Papers CNMV Working Papers no 60, CNMV- Spanish Securities Markets Commission - Research and Statistics Department.
    • Handle: RePEc:cnv:wpaper:dt_60en
    as

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    References listed on IDEAS

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    Cited by:

    1. Polat, Onur & Ozkan, Ibrahim, 2019. "Transmission mechanisms of financial stress into economic activity in Turkey," Journal of Policy Modeling, Elsevier, vol. 41(2), pages 395-415.

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    More about this item

    Keywords

    systemic risk; financial crisis; composite indicator; real economy;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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