Financial stress , dynamic factor models , financial crisis , euro area
Abstract:
The aim of this paper is to assess the dimension of factors and shocks that drive
financial conditions, and in particular financial stress in the euro area. A second
aim is to construct summary indices on the conditions and level of stress in financial
markets with the aid of a dynamic factor model. By analysing 149 newly compiled
monthly time series on financial market conditions in the euro area, our results
suggest that the data respond quite differently to fundamental shocks to financial
markets but the dimension of these shocks is rather limited. Consequently, countries
or segments of the financial sector in the euro area react fairly heterogonously to
such shocks. We estimate several common factors and by means of an exploratory
analysis we give them an economic interpretation. We find that the existence of
a "Periphery Banking Crisis" factor, a "Stress" factor and a "Yield Curve" factor
explains the bulk of variation in recent euro area financial sector data.
Das Dokument wird vom Publikationsserver der Universitätsbibliothek Mannheim bereitgestellt.
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