International transmission and business-cycle effects of financial stress

Threshold effects of financial stress on monetary policy rules: A panel data analysis

“…According to Coibion and Gorodnichenko (2012), interest rate smoothing has the potential benefit of reducing financial sector instability because interest rates would become more predictable. The variable γ j,t+k is an overall indicator of financial market uncertainty as measured by the FSI, as uncertainty is the main driving force behind the volatility in financial market indicators (see Cardarelli et al, 2011;Illing and Liu, 2006;van Roye, 2014;Dovern and van Roye, 2014). A number of papers have proposed that the optimal monetary policy augments a simple Taylor (1993) rule with a financial market indicator.…”

“…We highlight three main contributions to the literature that are both empirical and methodological. First, we employ the FSI of Dovern and van Roye (2014), as well as its subcomponents, i.e. banking sector, foreign exchange, stock market and government bond market stress for a wider set of countries around the world.…”

Does joint modelling of the world economy pay off? Evaluating global forecasts from a Bayesian GVAR

“…de Waal et al (2013) show that a richer GVAR 3 GVAR models have, for instance, been used to analyze the international transmission of oil price shocks (Cashin et al, 2014), house price shocks (Cesa-Bianchi, 2013), credit supply shocks (Eickmeier and Ng, 2015), cost-push shocks (Galesi and Lombardi, 2013), financial stress shocks (Dovern and van Roye, 2014), monetary policy shocks (Feldkircher and Huber, 2015), liquidity shocks during the Great Recession of -2009(Chudik and Fratzscher, 2011, and for stresstesting of the financial sector (Castrén et al, 2010). For a more complete overview, see Chudik and Pesaran (2014).…”

The financial and fiscal stress interconnectedness: The case of G5 economies

“…An explicit use of financial stress indexes, as metrics of the financial market conditions, is materialized by Dovern and van Roye (2014). In this paper, the authors analyze the international transmission of financial stress, while they also model its effect on the real economic activity.…”

“…In particulate, we model the financial and fiscal stress spillovers for the G5 countries. There is some evidence in the literature, indicating the existence of interactions of financial and economic cycles (Magkonis andTsopanakis, 2014, Dovern andvan Roye, 2014). We try to build upon this literature, in several dimensions.…”