Journal Article
No. 2017-6 | March 31, 2017
A financially stressed euro area

Abstract

The authors analyse 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 that 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.

JEL Classification:

C38, G01

Assessment

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Links

Cite As

Marcus Kappler and Frauke Schleer (2017). A financially stressed euro area. Economics: The Open-Access, Open-Assessment E-Journal, 11 (2017-6). http://dx.doi.org/10.5018/economics-ejournal.ja.2017-6


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