1. Canadian Financial Stress and Macroeconomic Condition
- Author
-
Thibaut Duprey
- Subjects
2019-20 coronavirus outbreak ,050208 finance ,modèle vectoriel autorégressif à seuil limite ,Public Administration ,Sociology and Political Science ,Financial stability ,Coronavirus disease 2019 (COVID-19) ,threshold vector autoregressive model ,indicateur de tensions financières ,financial crisis ,Severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) ,05 social sciences ,Financial market ,Financial system ,Articles ,marchés financiers ,financial stress index ,0502 economics and business ,Financial crisis ,Economics ,Financial stress ,crise financière ,financial markets ,050207 economics - Abstract
I construct a new composite measure of systemic financial market stress for Canada. Compared with existing measures, it better captures the 1990 housing market correction and more accurately reflects the absence of diversification opportunities during systemic events. The index can be used for monitoring. For instance, during the coronavirus disease 2019 pandemic, it reached a peak second only to the 2008 global financial crisis. The index can also be used to introduce non-linear macro-financial dynamics in empirical macroeconomic models of the Canadian economy. Macroeconomic conditions are shown to deteriorate significantly when the Canadian financial stress index is above its 90th percentile.
- Published
- 2020
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