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A financial stress indicator for Germany

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  • Metiu, Norbert

Abstract

This paper describes the Bundesbank's weekly financial stress indicator for Germany. The indicator condenses several financial market variables into a summary measure of financial stress. It represents a contemporaneous, market-based indicator that captures the materialisation of systemic risk along three different risk dimensions - credit, liquidity and market risk. Judged by this measure, the German financial system has experienced its most severe financial stress period since 2002 during the 2008 global financial crisis, with highly elevated levels in all three dimensions of financial stress. The indicator also points to historically high stress levels during the euro area sovereign debt crisis in the early 2010s. Recent readings of the indicator, by contrast, indicate historically low levels of financial stress.

Suggested Citation

  • Metiu, Norbert, 2024. "A financial stress indicator for Germany," Technical Papers 10/2024, Deutsche Bundesbank.
    • Handle: RePEc:zbw:bubtps:312405
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    File URL: https://www.econstor.eu/bitstream/10419/312405/1/1918510350.pdf
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    References listed on IDEAS

    as
    1. Duprey, Thibaut & Klaus, Benjamin & Peltonen, Tuomas, 2017. "Dating systemic financial stress episodes in the EU countries," Journal of Financial Stability, Elsevier, vol. 32(C), pages 30-56.
    2. Stock, James H & Watson, Mark W, 2002. "Macroeconomic Forecasting Using Diffusion Indexes," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(2), pages 147-162, April.
    3. Metiu, Norbert, 2022. "A composite indicator of financial conditions for Germany," Technical Papers 03/2022, Deutsche Bundesbank.
    4. Kremer, Manfred & Lo Duca, Marco & Holló, Dániel, 2012. "CISS - a composite indicator of systemic stress in the financial system," Working Paper Series 1426, European Central Bank.
    5. repec:ecb:ecbwps:20111426 is not listed on IDEAS
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    More about this item

    Keywords

    diffusion index; factor model; financial conditions; financial stability;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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