Discussion Paper
No. 2016-4 | January 27, 2016
Lixin Sun and Yuqin Huang
Measuring the Instability of China’s Financial System: Indices Construction and an Early Warning System

Abstract

In this paper, employing several econometric techniques, the authors construct a financial stress index (CNFSI) and a financial conditions index (CNFCI) to measure the instability of China’s financial system. The indices are based on the monthly data collected from China’s inter-bank markets, stock markets, foreign exchange markets and debt markets. Using these two indices, they identify the episodes of systemic financial stress, and then evaluate the indices. The empirical results suggest that the CNFSI performs better than the CNFCI. Furthermore, the authors propose four leading indicators for monitoring China’s financial instability, and provide a primary early warning system for China’s macroprudential regulations.

Data Set

JEL Classification:

G18, C43, E44

Links

Cite As

[Please cite the corresponding journal article] Lixin Sun and Yuqin Huang (2016). Measuring the Instability of China’s Financial System: Indices Construction and an Early Warning System. Economics Discussion Papers, No 2016-4, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2016-4


Comments and Questions



Laurens Swinkels - Review
January 29, 2016 - 15:10 | Author's Homepage
Please find the attached file with comments and suggestions.

Laurens Swinkels - Now with file
January 29, 2016 - 15:12
Now with file

Lixin Sun - Reply to Dr. Swinkels' Comments
February 02, 2016 - 16:39 | Author's CV, Homepage
See the attached reply.

Anonymous - Referee Report 1
February 23, 2016 - 08:15
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Lixin Sun - Reply to Referee Report 1
February 25, 2016 - 01:33
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Anonymous - Referee Report 2
February 23, 2016 - 08:15
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Anonymous - Reply to Referee Report 2
February 25, 2016 - 01:37
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