A New Financial Stress Index for Ukraine

This study improves on the methodology for calculating the financial stress index (FSI) for Ukraine by introducing a time-varying correlation into the aggregation of five subindices (representing the banking sector, households, the corporate sector, government securities, and the foreign exchange (F...

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Main Author: Vladyslav Filatov
Format: Article
Language:English
Published: National Bank of Ukraine 2021-06-01
Series:Visnyk of the National Bank of Ukraine
Subjects:
Online Access:https://journal.bank.gov.ua/en/article/2021/251/03
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author Vladyslav Filatov
author_facet Vladyslav Filatov
author_sort Vladyslav Filatov
collection DOAJ
description This study improves on the methodology for calculating the financial stress index (FSI) for Ukraine by introducing a time-varying correlation into the aggregation of five subindices (representing the banking sector, households, the corporate sector, government securities, and the foreign exchange (FX) market). The index consists of 20 indicators selected from an initial list of 47 potential candidates. To check the performance of the indicators, subindices, and the index, we use the area under the receiver operating characteristic curve (AUROC) and logit tests. Each subindex is assigned a weight that reflects the impact of each market on the financial system. This new FSI peaks during periods of crisis that are in line with the consensus of financial experts and performs better than the previous FSI, which makes it more attractive for policy decisions. In particular, the new FSI can be used as a monitoring tool for the macroprudential policy of the National Bank of Ukraine.
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spelling doaj.art-512f346eed8549e98f8d8b7828e892592022-12-21T23:52:21ZengNational Bank of UkraineVisnyk of the National Bank of Ukraine2414-987X2021-06-01251375410.26531/vnbu2021.251.03A New Financial Stress Index for UkraineVladyslav Filatov 0National Bank of Ukraine, National University of Kyiv-Mohyla AcademyThis study improves on the methodology for calculating the financial stress index (FSI) for Ukraine by introducing a time-varying correlation into the aggregation of five subindices (representing the banking sector, households, the corporate sector, government securities, and the foreign exchange (FX) market). The index consists of 20 indicators selected from an initial list of 47 potential candidates. To check the performance of the indicators, subindices, and the index, we use the area under the receiver operating characteristic curve (AUROC) and logit tests. Each subindex is assigned a weight that reflects the impact of each market on the financial system. This new FSI peaks during periods of crisis that are in line with the consensus of financial experts and performs better than the previous FSI, which makes it more attractive for policy decisions. In particular, the new FSI can be used as a monitoring tool for the macroprudential policy of the National Bank of Ukraine.https://journal.bank.gov.ua/en/article/2021/251/03financial stabilityfinancial stress indexindicator performance
spellingShingle Vladyslav Filatov
A New Financial Stress Index for Ukraine
Visnyk of the National Bank of Ukraine
financial stability
financial stress index
indicator performance
title A New Financial Stress Index for Ukraine
title_full A New Financial Stress Index for Ukraine
title_fullStr A New Financial Stress Index for Ukraine
title_full_unstemmed A New Financial Stress Index for Ukraine
title_short A New Financial Stress Index for Ukraine
title_sort new financial stress index for ukraine
topic financial stability
financial stress index
indicator performance
url https://journal.bank.gov.ua/en/article/2021/251/03
work_keys_str_mv AT vladyslavfilatov anewfinancialstressindexforukraine
AT vladyslavfilatov newfinancialstressindexforukraine