## A Financial Conditions Index for Poland

_IMF Working Papers, December 19, 2013_

## Source details

**Canonical URL:** [A Financial Conditions Index for Poland](https://www.imf.org/en/publications/wp/issues/2016/12/31/a-financial-conditions-index-for-poland-41149)

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## Bibliographic details
- Authors: Giang Ho, Miss Yinqiu Lu
- Published: December 19, 2013
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475540642.001

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### Summary
- This paper constructs a financial conditions index (FCI) for Poland to explore the link between financial conditions and real economic activity.
- The index is constructed by applying two complementary approaches—factor analysis and vector auto-regression (VAR).
- The FCI is evaluated against a composite leading indicator (CLI) developed by the OECD.
- Key empirical result: the FCI is highly correlated with GDP growth, attesting to the importance of the financial sector in Poland’s economy.
- Forecast performance: in-sample and out-of-sample forecasting exercises indicate that the FCI can outperform the CLI in predicting near-term GDP growth.

### Methodology
- Approaches used:
  - Factor analysis (factor FCI)
  - Vector autoregression (VAR FCI)
- Comparison benchmark:
  - Composite leading indicator (CLI) developed by the OECD

### Findings and Interpretation
- The FCI shows a high correlation with GDP growth in Poland.
- The financial sector plays an important role in influencing real economic activity in Poland.
- Forecasting exercises (both in-sample and out-of-sample) show the FCI can outperform the OECD CLI for near-term GDP growth prediction.

### Subjects and Keywords
- Subjects:
  - Bond yields
  - Econometric analysis
  - Financial conditions index
  - Financial institutions
  - Financial sector policy and analysis
  - Loans
  - Sovereign bonds
  - Vector autoregression
  - Yield curve
- Keywords:
  - Bond yields
  - constructed FCI
  - Europe
  - factor analysis
  - factor FCI
  - FCI weight
  - Financial conditions index
  - forecasting property
  - Global
  - lending
  - lending standard
  - Loans
  - Poland
  - rate
  - Sovereign bonds
  - VAR FCI
  - vector auto-regression
  - Vector autoregression
  - WIBOR
  - WP

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/a-financial-conditions-index-for-poland-41149_