CISS - A Composite Indicator of Systemic Stress in the Financial System

Abstract

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Financial Stress Indices and Financial Crises

“…Financial stress indices have been constructed for one country (e.g., Illing and Liu 2006;Hakkio and Keeton 2009;Morales and Estrada 2010;Holló 2012) or for several countries (e.g., Holmfeldt et al 2009;Cardarelli et al 2011;Slingenberg and de Haan 2011;Holló et al 2012;Cevik et al 2013;Islami and Kurz-Kim 2013). In general, stress indices for a single country combine more indicators into one statistic than multicountry stress indices (see Table 6 in the Appendix for a comparison of several stress indices; for a more extensive comparison we refer to Kliesen et al 2012).…”

“…This is not surprising in view of data availability. Most studies use market data, but some (e.g., Holló et al 2012) use both mixed market and balance sheet data, while Morales and Estrada (2010) consider only balance sheet data.…”

“…Illing and Liu 2006;Hakkio and Keeton 2009). More recently, Holló et al (2012) employed portfolio theory based aggregation schemes that take into account the correlation structure of stress indicators in order to quantify the level of systemic stress.…”

“…If the index is above 0, it indicates stress; if it is below 0, the financial system is stable. To examine whether our results are driven by the aggregation procedure, we also construct an alternative FSI, called FSIA, following a similar aggregation procedure as suggested by Holló et al (2012), which will be explained below. Table 2 shows the correlation of our financial stress index and its components (subindices).…”

Financial shocks and the real economy in a nonlinear world: From theory to estimation

“…are the real GDP growth rate, the inflation rate, the short-term interest rate, the growth rate of the stock of credit to the private sector, and an indicator of financial stress especially designed for the euro area (the Composite Indicator of Systemic Stress, or CISS, based on the work of Holló, Kremer, and Lo Duca, 2012). All the variables except the financial stress indicator and the short-term interest rate are expressed in quarter-on-quarter growth rates.…”