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Estimation of a Financial Conditions Index for Mexico

Author

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  • Armendáriz Villarreal Thelma
  • Ramírez Claudia

Abstract

A tool that has been widely used to identify the state of financial conditions in a country are the financial conditions indexes, since they synthesize information from different variables in a single indicator allowing to identify the general behavior of financial conditions in a timely and condensed manner. In this paper we construct and analyze a Financial Conditions Index (FCI) for Mexico that allows to capture diverse episodes of financial stress and to know the main factors behind movements in financial conditions. The results show that this FCI adequately captures moments of astringency in financial markets in Mexico such as the financial crisis of 2008-2009, the crisis in Europe in mid-2011, the beginning of the "tapering talk" in the United States in the second half of 2013, among others.

Suggested Citation

  • Armendáriz Villarreal Thelma & Ramírez Claudia, 2015. "Estimation of a Financial Conditions Index for Mexico," Working Papers 2015-17, Banco de México.
    • Handle: RePEc:bdm:wpaper:2015-17
    as

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    File URL: https://www.banxico.org.mx/publicaciones-y-prensa/documentos-de-investigacion-del-banco-de-mexico/%7BC46B2050-A04C-60FC-7784-7E625F359B4F%7D.pdf
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    References listed on IDEAS

    as
    1. Boivin, Jean & Kiley, Michael T. & Mishkin, Frederic S., 2010. "How Has the Monetary Transmission Mechanism Evolved Over Time?," Handbook of Monetary Economics, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 8, pages 369-422, Elsevier.
    2. Scott Brave & R. Andrew Butters, 2011. "Monitoring financial stability: a financial conditions index approach," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 35(Q I), pages 22-43.
    3. Aruoba, S. BoraÄŸan & Diebold, Francis X. & Scotti, Chiara, 2009. "Real-Time Measurement of Business Conditions," Journal of Business & Economic Statistics, American Statistical Association, vol. 27(4), pages 417-427.
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    More about this item

    Keywords

    Financial conditions index; principal components; Mexico;
    All these keywords.

    JEL classification:

    • I10 - Health, Education, and Welfare - - Health - - - General
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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