Canadian Financial Stress and Macroeconomic Condition

Abstract

L'auteur crée un nouvel indicateur composite de tensions systémiques du marché financier pour le Can ada. Comparativement aux mesures existantes, cet indicateur rend mieux compte de la correction du marché immobilier en 1990 et reflète avec plus d'exactitude l'absence de possibilités de diversifi cation lors d'événements systémiques. L'indicateur proposé peut servir à des fins de contrôle. Durant la pandémie de maladie à coronavirus de 2019, par exemple, il a atteint un sommet que seule surpasse la crise financière mondiale de 2008. L'indicateur peut également servir à intégrer la dynamique macrofinancière non liné aire dans les modèles macroéconomiques empiriques de l'économie canadienne. Selon les constatations de l'auteur, les conditions macroéconomiques se détériorent sensiblement lorsque l'indicateur canadien de tensions financières excède le 90 e percentile. Mots clés : crise financière, indicateur de tensions fi nancières, marchés financiers, modèle vectoriel autoré gressif à seuil limite I construct a new composite measure of systemic financial market stress for Canada. Compared with ex isting measures, it better captures the 1990 housing market correction and more accurately refl ects the absence of diversification opportunities during systemic events. The index can be used for monitoring. For instance, during the coronavirus disease 2019 pandemic, it reached a peak second only to the 2008 global financial crisis. The index can also be used to introduce non-linear macro-financial dynamics in empirical macroeconomic models of the Canadian economy. Macroeconomic conditions are shown to deteriorate significantly when the Canadian financial stress index is above its 90th percentile.

Systemic Financial Stress and Macroeconomic Amplifications in the United Kingdom*

“…Given that the UKFSI was optimized on three financial crises in‐sample (1973‐75, 1991‐94, 2007‐09), the peak around the COVID‐19 crisis acts as an out‐of‐sample confirmation of our methodology. So far, the COVID‐19 crisis, as reflected by the financial market, appears to be less severe than the 2008 financial crisis (for Canadian case, see Duprey, 2020).…”

Using payments data to nowcast macroeconomic variables during the onset of Covid-19

“…The CFSI is a newly created composite measure of systemic financial market stress for Canada. It is available immediately and is shown to track the economic crisis (Duprey 2020). The CFSI is constructed using data from multiple market segments.…”

Do Mutual Funds’ Exposure to Financial Stress Predict Their Future Returns? Evidence From China

“…Afonso et al (2018) study the linkages between changes in the debt ratio, economic activity, and financial stress within different financial regimes. In the most recent related research, Duprey (2020) construct a new systematic financial market stress measure for Canada. This systematic financial market stress measure reached a peak during the COVID-19 outbreak, and the measure at that time was second only to the measure during the 2008 global financial crisis for Canada.…”

“…Gkillas et al (2020) find that financial stress does have predictive value for realized oil-price volatility with alternative types of investors benefiting from monitoring different regional sources of financial stress. Duprey (2020) studies housing market corrections and suggestions on the supervision of financial stress. Since the coronavirus disease pandemic has seriously affected various countries' economic and social development, it also can affect financial market risk and assets prices (Zhu et al, 2021).…”