Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/141421
Authors: 
Kappler, Marcus
Schleer, Frauke
Year of Publication: 
2016
Series/Report no.: 
Economics Discussion Papers 2016-22
Abstract: 
The authors analyze 149 newly compiled monthly time series on financial market stress conditions in the euro area. With the aid of a factor model they find different sources of financial stress which are important for selecting and preparing the appropriate policy response. The existence of a "Periphery Banking Crisis" factor, a "Stress" factor and a "Yield Curve" factor seems to explain the bulk of volatility in recent euro area financial sector data. Moreover, by a real-time forecasting exercise, the authors show that including additional factors - that reflect financial sector conditions - improves forecasts of economic activity at short horizons.
Subjects: 
financial stress
dynamic factor models
financial crisis
euro area
forecasting
JEL: 
C38
G01
Creative Commons License: 
http://creativecommons.org/licenses/by/4.0/
Document Type: 
Working Paper

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