The Spillover Effects of the Global Crisis on Economic Activity in Mena Emerging Market Countries-An Analysis Using the Financial Stress Index

PurposeIn spite of the certain risk imposed by financial stress on the real economy, the relationship between financial stress and economic activity is complicated and underresearched, meaning that important gaps still remain in the authors’ understanding of this critical relationship. Therefore, the current study aims to answer the significant question regarding whether a stressful financial sector has predictive power on the real sector and vice versa. Hence, the study examines the causal interrelationship between financial stress index (FSI) and economic activity in Luxembourg as a sample country.Design/methodology/approachIn this study, accompanying the time domain Granger causality framework of Hacker and Hatemi-J (2012), the authors utilize the spectral causality technique of Breitung and Candelon (2006), which is based on the study of Geweke (1982) and Hosoya (1991). This method enables the researcher to measure the degree of a particular variation in time series. Moreover, it allows considering the nonlinearities and causality cycles. The authors further apply the recent method of Farné and Montanari (2018) that is a bootstrap framework on Granger-causality spectra, which allows for disambiguation in causalities.FindingsThe time-domain approach finds evidence of bidirectional causation between the variables. However, the spectral causality results indicate the causal linkages between the series are only valid under the medium-run frequency. This study’s findings emphasize covering the frequency causality to deliver a more comprehensive picture of the interrelationship between the variables.Originality/valueThere are many studies in this area that examine the nexus between financial stress and economic activity. However, the authors believe this paper is the first study in the context of Luxemburg. The authors focus on this country since its financial sector is designated as the most important pillar for the economy. Thus, a careful and reliable examination of the relationship between the financial sector and economic activity is likely to be of considerable interest to policymakers and researchers in this field.

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Analysis of the Literature of Financial Stress Index and Proposed Model for Pakistan.

International Review of Management and Business Research ◽

10.30543/10-2(2021)-9 ◽

2021 ◽

Vol 10 (2) ◽

pp. 109-122

Author(s):

KINZA YOUSFANI ◽

ABDUL SUBHAN KAZI ◽

KARIM BUX SHAH SYED

Keyword(s):

Economic Activity ◽

Financial Stress ◽

Past Research ◽

Stress Index ◽

Economic Policies ◽

Economic Activities ◽

Developed Markets ◽

Proposed Model ◽

Financial Stress Index ◽

The Impact

In the recent past, research in developed markets has aimed at developing various indices that can be applied to apprehend the impact that financial stress can have on a country’s economic activity. This article reviews the literature on financial stress and its impact on economic activities. It further presents a proposed methodology for constructing financial stress index and its implications for macroeconomic performance in relation to Pakistan. A review of the literature was conducted discussing (a) the formulation of the financial stress index and (b) its impact on the country’s economic activity indicators. The analysis of the literature made it possible to identify the current themes and remaining gaps in the literature on the financial stress index. It is concluded that FSI is beneficial for monitoring and evaluating the usefulness of government economic policies in crisis as well as normal times. Moreover, the index grabs the stresses in the form of financial stress, which is not only from various market sectors but also from their connection through a contagious effect internationally. Therefore, the paper concludes that the FSI could be established and used as an effective tool to measure and monitor financial stress level and its impact on various economic activity indicators in Pakistan. Keywords: Financial Stress Index, GDP, Industrial Production, Foreign Trade, PCA, Emerging Markets, Pakistan.

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The Cleveland Financial Stress Index

SSRN Electronic Journal ◽

10.2139/ssrn.2244555 ◽

2012 ◽

Cited By ~ 1

Author(s):

Timothy Bianco ◽

Mikhail V. Oet ◽

Stephen J. Ong

Keyword(s):

Financial Stress ◽

Stress Index ◽

Financial Stress Index

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Can the Australian Dollar and Canadian Dollar Be Predicted Using Financial Stress Index?

SSRN Electronic Journal ◽

10.2139/ssrn.3130538 ◽

2018 ◽

Author(s):

Ikhlaas Gurrib

Keyword(s):

Financial Stress ◽

Canadian Dollar ◽

Stress Index ◽

Australian Dollar ◽

Financial Stress Index

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TOURISM INDUSTRY STRESS INDEX AND ITS RELATIONSHIP TO THE FINANCIAL STRESS INDEX

Tourism and hospitality management ◽

10.20867/thm.27.2.8 ◽

2021 ◽

Vol 27 (2) ◽

pp. 363-383

Author(s):

Marina Malkina ◽

Anton Ovcharov

Keyword(s):

Interaction Design ◽

Moving Average ◽

Financial Stress ◽

Principal Component ◽

Tourism Industry ◽

Real Effective Exchange Rate ◽

Stress Index ◽

Marginal Effect ◽

Causality Test ◽

Financial Stress Index

Purpose – development of the Tourism Industry Stress Index (TSI) and the Financial Stress Index (FSI) followed by an examination of their interaction. Design – The TSI, which aggregates tourist arrivals, overnight stays and net occupancy, was tested on data for Finland, Italy, Germany and Spain between 1993 and 2020. The FSI was composed of the S&P500 index, Brent oil futures, and the real effective exchange rate of the euro. Methodology / Approach – Both stress indices were calculated as the difference between the moving standard deviation and the moving average of the monthly growth rate of the selected indicators. We aggregated them by applying two alternative techniques: arithmetic mean and nonnormalized principal component analysis. The Granger causality test was utilised to assess the dependence between the indices. Findings – We identified periods of increased volatility in the European tourism market and described its connection to financial crises. The causality test of the FSI-TSI model showed that financial turmoil led to increased tourism market stress with an average lag of three months and a marginal effect of 0.2. Originality of the research – We recommend the Financial Stress Index as a predictor of the Tourism Industry Stress Index in the business cycle.

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Measuring the Impact of Financial Crisis

Advances in Finance, Accounting, and Economics - Handbook of Research on Financial and Banking Crisis Prediction through Early Warning Systems ◽

10.4018/978-1-4666-9484-2.ch013 ◽

2016 ◽

pp. 274-283

Author(s):

İsmail Yıldırım

Keyword(s):

Exchange Rate ◽

Interest Rate ◽

Financial Crisis ◽

Global Financial Crisis ◽

Financial Stress ◽

Stress Index ◽

Destructive Effect ◽

Monthly Data ◽

Financial Stress Index ◽

The Impact

Crisis in 2001 and global financial crisis in 2008 effect Turk economy in a lot of ways. Financial crisis creates destructive effect especially on increasing market economies. It is not so easy to watch occurring of this financial crisis and determining of its expanding. First of all determining of crisis terms are needed to predict of financial crisis. In this part, a financial stress index is composed by using TL interest rate and monthly data of global gross reserves belongs to $/TL exchange rate between 1997:01-2014:12 terms for Turkey. Months when financial stress index raised to top level for Turkey and financial crisis are observed on, are found as February(2001) and November (2008).

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