Work detail

Modelling of Financial Stress Index in the Czech Republic using Vector Autoregression Analysis

Author: Mgr. Ján Malega
Year: 2015 - winter
Leaders: prof. Roman Horváth Ph.D.
Consultants:
Work type: Finance, Financial Markets and Banking
Masters
Language: English
Pages: 68
Awards and prizes:
Link: https://is.cuni.cz/webapps/zzp/detail/138089/
Abstract: This study constructs a financial stress index with a specific focus on the case of the Czech
Republic. The advantage of the index is primarily its ability to measure the current level of
stress in the financial system incorporating information from various sectors of the economy
and expressing it in a single-value statistic. Our index successfully recorded and evaluated
critical periods of elevated financial stress especially during the recent financial crisis.
Furthermore, we examine a systematic interaction between financial stress and the
macroeconomics using vector autoregression analysis along with method of impulse responses.
Based on our results we observe a significant and positive response of unemployment due to
the shock in financial stress. Conversely, a negative effect was examined on inflation and
interest rates.

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