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Latvian Financial Stress Index

Author

Listed:
  • Nadezda Sinenko

    (Bank of Latvia)

  • Deniss Titarenko

    (Bank of Latvia)

  • Mikus Arins

    (Bank of Latvia)

Abstract

The objective of this Discussion Paper is to develop a methodology for Latvian FSI. To this effect, the particular methodologies widely used in international practice for composite indicators applied in financial stability monitoring and the experience of selected countries were examined. The authors analyse the nature of financial stress and the related symptoms and offer their interpretation of the financial stress concept. The Paper provides the rationale behind the selection of the individual indicators (components) comprised in the FSI, evaluates various options for aggregating the FSI components as well as features a comparison between the methodology applied for the Latvian FSI and the practice pursued in other countries. The main conclusion presented in the Discussion Paper is that the dynamics of the FSI developed on the basis of the Bank of Latvia's methodology is quite an accurate measure of changes in the Latvian financial system's stress levels. It signals periods of elevated stress as well as periods of an excessively vigorous and imbalanced development of the financial system. The Bank of Latvia has been using the FSI as one of the elements of Latvia's financial system stability monitoring framework since 2009.

Suggested Citation

  • Nadezda Sinenko & Deniss Titarenko & Mikus Arins, 2012. "Latvian Financial Stress Index," Discussion Papers 2012/01, Latvijas Banka.
    • Handle: RePEc:ltv:dpaper:201201
    as

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    Citations

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    Cited by:

    1. Nasreen, Samia & Anwar, Sofia & Ozturk, Ilhan, 2017. "Financial stability, energy consumption and environmental quality: Evidence from South Asian economies," Renewable and Sustainable Energy Reviews, Elsevier, vol. 67(C), pages 1105-1122.
    2. Mirna Dumicic, 2015. "Financial stress indicators for small, open, highly euroized countries: the case of Croatia," Financial Theory and Practice, Institute of Public Finance, vol. 39(2), pages 171-203.
    3. repec:ipf:finteo:v:39:y:2015:i:3:p:171-203 is not listed on IDEAS
    4. Mirna Dumičić, 2014. "Financial Stress Indicators for Small, Open, Highly Euroised Countries – the Case of Croatia," Working Papers 41, The Croatian National Bank, Croatia.

    More about this item

    Keywords

    financial stability; financial stress; financial stress index; financial system stability monitoring;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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