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IFCI-SA: International financial conditions index for South American economies

Author

Listed:
  • Brum-Civelli, Conrado
  • Fried-Gindel, Alejandro
  • Garcia-Hiernaux, Alfredo

Abstract

The Russian invasion of Ukraine in early 2022, triggered a wave of risk aversion in the global financial markets. In contrast to previous events, South American emerging economies experienced limited impact to this more restrictive global financial environment. To measure the financial conditions of these economies over time, we propose an International Financial Conditions Index for South American economies (IFCI-SA), built from a parametric factor model. This index includes standard variables provided by the literature, along with sovereign debt risk premia and the most relevant commodity prices for the region. We use our model and index to: (i) discuss South American financial conditions from 2007 to 2024; (ii) explain the impact of a particular global event like the Russo-Ukrainian war; (iii) decompose risk premia movements into global and domestic shocks; and (iv) test its forecasting capabilities.

Suggested Citation

  • Brum-Civelli, Conrado & Fried-Gindel, Alejandro & Garcia-Hiernaux, Alfredo, 2024. "IFCI-SA: International financial conditions index for South American economies," Research in International Business and Finance, Elsevier, vol. 72(PA).
    • Handle: RePEc:eee:riibaf:v:72:y:2024:i:pa:s0275531924003003
    DOI: 10.1016/j.ribaf.2024.102507
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    Keywords

    International financial conditions; South American economies; Emerging economies; Factor model;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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