A New Index of Financial Conditions

Gary Koop, Dimitris Korobilis

Research output: Working paperDiscussion paper

1 Downloads (Pure)

Abstract

We use factor augmented vector autoregressive models with time-varying coefficient to construct a financial conditions index. The time-variation in the parameters allows for the weights attached to each financial variable in the index to evolve over time. Furthermore, we develop methods for dynamic model averaging or selection which allow the financial variables entering into the FCI to change over time. We discuss why such extensions of the existing literature are important and show them to be so in an empirical application involving a wide range of financial variables.
Original languageEnglish
Place of PublicationGlasgow
PublisherUniversity of Strathclyde
Pages1-24
Number of pages25
Volume13
Publication statusPublished - 12 Mar 2013

Keywords

  • financial stress
  • dynamic model averaging
  • forecasting

Fingerprint Dive into the research topics of 'A New Index of Financial Conditions'. Together they form a unique fingerprint.

  • Projects

    Cite this

    Koop, G., & Korobilis, D. (2013). A New Index of Financial Conditions. (07 ed.) (pp. 1-24). University of Strathclyde.