Near-Coincident Indicators of Systemic Stress

Author/Editor:

Ivailo Arsov ; Elie Canetti ; Laura E. Kodres ; Srobona Mitra

Publication Date:

May 17, 2013

Electronic Access:

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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.

Series:

Working Paper No. 2013/115

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

English

Publication Date:

May 17, 2013

ISBN/ISSN:

9781484343784/1018-5941

Stock No:

WPIEA2013115

Pages:

33

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